26 Mar Salary sacrifice – the resurgance of the pseudo company car
The launch is part of a wider trial by the HyFive European project, with a consortium of manufacturers aiming to deploy 110 Fuel Cell Electric Vehicles (FCEV’s) direct to the consumer.
There is increasing evidence that the UK is rekindling it’s love affair with the company car, but this time as an integral part of ‘Flexible Benefits.
There is no doubt that the company car has been through a rough period since the turn of the century, as what used to be an ‘under-taxed’ benefit, was transitioned to reflect closer it’s real value. It has taken a while for the social mind-set to adjust to a situation where now, one pays a heavy premium for speed and power, beyond that of the additional cost of the fuel, nevertheless, most people now think about the car emissions equally with it’s status and quality and for the most part, make balanced decisions.
Salary Sacrifice schemes exploit the desire of most people to drive the most efficient car that suits their purpose and because they attract ‘benefit in kind’ tax as a company car would, they only really work if the car is reasonably tax efficient (i.e. low CO2).
The savings for the employee are derived from the fact that the employer costs will be lower than could be achieved by the employee on their own. Chiefly from better discounts, lower finance costs and from the employer’s ability to recover half of the VAT on lease payments. Because payments for the car are deducted from Gross salary, other savings come from reduced Employee and Employer National Insurance contributions. Provided that the vehicle has a low CO2 rating, the benefit in kind taxation should be less than PAYE on the salary that has been forgone.
Provided that suitable care is taken when structuring a scheme, everyone can be a winner (except the exchequer of course).
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