Staff choose cash over car

By Gareth Roberts
|
3 October 2012

Even at the 2016 tax rates the company car should continue to be a tax-efficient way of remunerating employees.

“The driver’s effective tax rate for the Toyota Prius T3 would be just 6% of its list price, compared to an effective tax rate of 42% on the cash equivalent,” added Whitcombe.

“As an industry, isn’t it time we stop allowing ourselves to be side-tracked by taxation and focus upon the commercial reality, which is that most company cars continue to offer excellent value.”

Many fleets agree. A recent survey of Fleet200 companies revealed that half intend to look at introducing policies to convert cash takers to company car drivers over the next 12 months.

Across Europe, tax efficiency is one of the most important factors for companies deciding whether to offer car schemes, according to Towers Watson.

In countries where there is greater tax effectiveness for cars, employers are more likely to make car-only benefits the norm for employees.

One change made by half the companies in the Towers Watson report, which includes information on car policies in 40 countries, was to introduce more tax-efficient, low CO2 cars.

Towers Watson’s company car benefit report is in its 16th edition and includes information and data on company car policies across 40 countries.

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Author: Gareth Roberts

News editor

gareth.roberts@bauermedia.co.uk

01733 468314

Gareth has more than 20 years’ experience as a journalist having started his career in local newspapers in the 1990s. Prior to joining Fleet News in 2008, he worked in the public sector as a media advisor and is currently news editor at Fleet News.

Comments (4)

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Robert - 03/10/2012 09:56

There is little doubt that a company car remains one of the most tax efficeient benefits. Looking at the HMRC figures in more detail (average taxable value) it can be seen that the cost of a company car to an employee has fallen in real terms over the past seven years. This, coupled with stable - or even falling lease costs - means that the company car should remain as a key element of reward and benefit strategies.
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Premierblue - 03/10/2012 12:05

This report confirms what everyone in the Industry already knows, and that is the illogical selection of cash in lieu of a more valuable company car benefit in many cases. I suspect the real reason is poor information for employees at the point of selection, although it has to be said that many employers also lack understanding of the true costs of all the car benefit options. If employees are given the choice between car benefits (that may even include ECO) it is vital they understand the relative costs, risks and benefits so that they can make informed decisions.
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Tim Muir - 04/10/2012 09:05

This is all very well taking into consideration the authors"choice" of vehicle on which his calculations are based. Recalculate the cost to the individual if it is a 2.0 litre diesel with a list price of £25K, which is the norm for most manangers. you will then see it does become punative to the individual. Rather a one-sided agrument.
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Robert - 05/10/2012 10:20

If you look at the HMRC statistics the average BiK in 2010/11 was £3,830. In 2005/5 was £3,530. Adjusted for inflation that would have risen to over £4,000 by 2010/11. There can be little doubt that the company car remains a tax efficient and attractive benefit. A 'typical' Audi A4 diesel would cost a 40% tax payer an average of £1,900 a year in tax over the next three years. £160 a month for a £27,000 car doesn't feel 'punitive' to me.
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