Fleets were asked what their current status of offering a cash allowance alternative to company car drivers, following the new rules outlined in the 2017 Finance Bill.
The new legislation moves the benefit charge on cars to be the higher of the company car benefit or the salary sacrifice/cash allowance amount.
Here is a summary of the discussion:
- A number of fleets are concerned that employees simply don’t understand the changes.
- Some have already taken the option away from those that have a job need to simplify the transition.
- Fleets fear some employees may end up in older less efficient grey fleet vehicles if the car no longer provides an incentive.
- Although plug-in hybrid vehicles (or those emitting under 75g/km) are protected against the new regulations, as these vehicle command a higher list price they may not be available to lower banded drivers.
- Other drivers may be tempted by more powerful, less efficient models, if the tax incentive is removed as they will be paying a higher amount of tax regardless of the model they choose.
- Fleet managers feel the decision on whether to keep a cash allowance is heavily influenced by HR who are keen to offer prospective employees an attractive deal and don’t want to take a car allowance off the table.
- The group felt more employees tend to opt for a car but a blanket policy to remove the cash option would not benefit all and may need to be decided on a case-by-case basis.
- Educating drivers could prove challenging especially for those who are still a few years off a replacement and are currently unaffected by the new rules.
- Once fleet manager was in the process of adding a large number of new drivers to his fleet, potentially with the option of a cash allowance – as didcated by HR – but feared that this may promote the wrong behaviour
- It was agreed by the group that employees were better off with a car in the long-run. Not only for the cost savings when insurance, VED and maintenance were taken into account, but also for the safety and compliance with best practice.