Tax specialist offers clarity on funding methods

An increasing number of employers are seeing the car as more than just a business tool.

In a competitive employment market, it is becoming ever more important in terms of recruitment and retention. But, what are the different ways employers can provide their staff with a vehicle?
Many organisations will provide their employees with a company car through traditional means, but it is increasingly common to offer choice in how vehicles are funded, according to Mark Morton, employer solutions manager at Grant Thornton.

“The most common alternative option is a cash allowance,” said Morton. “It’s the simplest to administer – you just give the individuals an amount of money.”

But how much money do you give an employee? “Do you give them enough money to break even as an employer or enough money for the driver to break even,” asked Morton.

Employee car ownership schemes however, provide employers with a much more structured option to just handing over a cash amount.

“This looks like and feels like a company car, but it is taxed differently,” said Morton. “They can generate huge savings for the right employers with the right demographic.”

However, it is salary sacrifice arrangements which are really beginning to take-off, according to Morton.

“It is seen as an extremely attractive recruitment and retention tool,” he said.

Morton took visitors to Fleet Management Live (FML) through the range of funding options, showing how the different costs stack-up for both the employer and employee.

But whatever method an organisation employs, communication is key, according to David Oliver, procurement manager at Red Bull.

He said: “One of the first conversations we have with our company car drivers when they come to look at the choice list is on benefit in kind. It stops people getting hung-up on different models.”