An alternative to providing your employees with cars
Offering employees a company car allowance instead of a car will mitigate employers Class 1A National Insurance Contributions (for providing both a company car and – in some cases – fuel) and remove employees’ company car tax liabilities – a potential win-win scenario for both parties.
The shift to company car allowances was partially driven by the Labour Government’s 2002 Budget changes to Benefit In Kind (BIK) tax, which forced many desirable “status cars” off user-chooser company car lists.
- Excessive mileage claims
- Inadequate insurance issues, as cars may not be properly insured for business use
- Vehicle safety issues, as employers still have a duty of care over their business drivers, even if employees drive their own cars
- During a recession, Company Car Allowances can become more expensive, while the price of new cars can often fall in real terms. Employers can find themselves paying Company Car Allowances to employees that actually costs them more than providing the employee with a company car.
Naturally, some employees may opt to buy a used car with a cash allowance.
Whilst many companies were unwinding their company car fleets due to increase company car taxation, many businesses failed to recognise that they would still have duty of care responsibilities over their employees who would drive their own vehicles on company business.
- Support your grey fleet employees, so that they make an informed decision about taking a Car Allowance in lieu of a company car.
- Regularly check the driving licences of your “grey fleet” employees.Company Car Allowance
Under inflated tires make the vehicle run less efficiently and waste gas.
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