Cash For Car Allowances
The debate rages on between company cars and a cash for car allowance. This is a topic of complexity and there are many factors that need to be taken into account when considering the best option for the employer and the employee.
The balance is about to shift back towards Company Cars following the Chancellors Budget Statement, because the Tax Allowances for lower polluting cars will become more favourable to businesses that lease their vehicles. This means that the cost to the business reduces thereby effectively reducing the reimbursement cost point to the employee when calculating the Cost Neutral position.
Vehicles which emit less than 160g CO2 will become much more attractive for businesses to lease. Those that emit more than 160g CO2 will become less attractive, except perversely for vehicles that cost more than about £30,000 which will also gain.
The trick, as always, is to pick the car wisely. By consulting with us we can ensure that your pleasure does not have to be painful.
But if you or your drivers do decide on the Cash Alternative, factors which need to be borne in mind are:
- Hassle Factor - This is being handed over to the driver. Do you want the driver being distracted by issues with the car rather than getting on with their job?
- Funding Costs - these will almost certainly be higher for an individual than a business. There is also the issue of credit worthiness
- Staff Morale - Does offering a cash alternative remove a powerful motivational or negotiating tool for the business?
- mileage Allowances - Will the employer come under pressure to ensure that these are paid at the highest level allowable under HMRC rules?
- Insurance - Can you trust the employee to obtain appropriate insurance for business purposes? If they don’t this could spell big trouble for the employer
- Company Image - Will the employee be able to acquire a vehicle that not only is fit for purpose, but continue to portray the business in a positive light?
