by David Bushnell, product manager mobility at Alphabet GB
The publication of the 2017 Finance Bill has caused sleepless nights among the UK’s fleet decision makers who are rightly concerned with the lack of clarity, practical implementation and unintended consequences of recent Government decisions.
So far the debate has gravitated around the salary sacrifice changes or OpRAs - Optional Remuneration Arrangements.
Increasingly over recent weeks we’ve heard concerns expressed about the practical implications of the changes, such as the inability of HMRC systems to handle P46 and P11D reporting changes until 2018 or even 2019.
But in boardrooms and HR departments across the land there is a more strategic discussion taking place following the Finance Bill - cash versus car.
The changes coming in are forcing companies to review and reduce the company car options they provide to employees. Where previously a company may have offered a cash option or a vehicle, they now have to choose to offer either cash or a car.
With the complexities and responsibilities that come with providing company cars, many companies are seriously questioning whether to go down the apparently simplified route of offering solely a cash option. This, in my view would be a big mistake and extremely short-sighted in view of the longer term consequences.
It would be easy for fleet decision makers to think that company car programmes as ‘more hassle than they’re worth’. But this takes for granted the huge benefits such schemes provide to an organisation, not just to their employees.
It’s difficult to put monetary costs on the financial and legal value of a company car programme. The visibility, control and ability to deliver against duty of care that such schemes provide are invaluable. Aside from the significant benefits for recruitment and retention, the value of a company car programme to an organisation is only truly understood when it is not there or something goes wrong.
It’s worth remembering that even by switching to a cash-only scheme, the company still retains its duty of care obligations for employees using these vehicles for business travel. How will you know if your employee has insured, maintained and serviced that vehicle correctly? How will you know the environmental impact of these journeys?
Unlike company car drivers, ‘cash’ buyers have little incentive to make the right choices in terms of fuel economy or environmental impacts.
From the employee driver perspective, it’s easy to hear about company car tax rises and think the grass is greener as a cash buyer. It is perhaps until you do the maths in terms of servicing, maintenance, insurance - don’t forget to include ‘business use’ - and all the other costs you previously haven’t had to consider as a company car driver. It all adds up and a set of new tyres is a considerable, sometimes unexpected outlay.
A company car is still a great value package if you choose the right vehicle in terms of low or zero emissions, fuel economy and - following the VED changes – list price.
Organisations need to review their approaches and consider treating ‘essential users’ and ‘perk drivers’ within the employee population differently to accommodate the changes. Restating the real world, benefits of your company car package to employees is also worth consideration.
Similarly, don’t let the views of senior managers who have previously opted for cash cloud your judgement on the car scheme for your whole organisation. The company car is only a small part of the big corporate machine, but without this small cog working efficiently and safely the whole machine can quickly come to a halt.
There’s no doubt fleet decision makers need to take action following the changes. Doing nothing is not an option but fleet owners need to think long and hard to beware of making a knee-jerk decision into choosing a cash only car policy.
Are you considering the wider implications of the Finance Bill across all of your business travel, mobility and expenses policies?
The Engineer - 25/04/2017 19:30
A company car is not the perk it used to be for sure, your limited in choice not necessarily by the company but the crippling rise in company car tax, with some companies choosing to apply eco policy penalties on its poor drivers too. A set of tyres is expensive but I would rather change mine at 3mm than 1.8mm when the lease company says you can. Why would you not maintain something you own and have liability for? A company car forces you to take on a brand new car each time and who pays for the terrible initial depreciation, the driver effectively of course. Then your paying the lease company for its services and profit margins. yes they get cars cheap through their buying power but it can't compete with a pristine low mileage 1 year old used car that someone else has taken the hit on for value. Servicing is more difficult as it has to be arranged via the 3rd party lease company instead of a direct relationship with a local dealership. A cash taker also has the big advantage of being able to change vehicle easier to suit changes in role or family or just buying/getting rid of a caravan. really, to the driver the advantages of a company car are getting thinner, the main ones being of course less liability and less admin to source, finance and arrange the tax, insurance and such. Company cars the way its going will mean one of two things, we all end up in tiny £10,000 1.0L cars for tolerable tax or we resign ourselves to paying so much tax it overtakes mortgage payments as the biggest monthly outgoing. Neither sounds fun!