News
Staff Member
As agricultural recruitment specialists we’re often asked, by both employers and candidates alike,about the benefits (or not), of a company car as part of a salary package and so we decided toprovide the answer which is… it’s not quite that simple!
Historically, company cars have been considered a ‘perk’ for high-achieving employees and a‘must-have’ for anyone in an on-the-road sales role. It’s common knowledge that a company car is considered a benefit in kind by HMRC - especially if it’s used for private, as well as business purposes - both for the employer and the employee. But, we’ve taken a further look at the good, thebad and the downright dastardly from both perspectives - and it doesn’t always just come down to the financial gains/losses:
Employees
So, you’ve visited merstonpeters.co.uk and spotted your dream job - the job description’s a career move you’d like to make; the location is ideal and the salary is certainly in the attractive bracket butthe employer is offering you the choice of a company car or a car allowance - what should youconsider -and are there alternatives?
Company car
• An employer will almost certainly decide upon the type of car offered, or at least some specifications such as an upper price limit; the fuel type; the C02 emission level; the safety aspects - if you have your heart set on a particular car or performance level, this may not be on offer.
• A company car will almost certainly include insurance, road tax, repairs, servicing etc, giving youpeace of mind and hassle-free driving.
• company cars are taxable and the level is calculated using a combination of the list price of the car, its C02 emissions and the fuel type; this figure is then added to your salary and taxed accordingly. As an example, a petrol car with emissions of 74g/km costing £15,000 would give rise to a taxable benefit of £750, whereas another car with the same specifications but emissions of210g/km would give rise to a taxable benefit of £5,250. It’s worth finding out what type of company car your potential employer is offering before making a decision. For further information visithttp://cccfcalculator.hmrc.gov.uk/CCF0.aspx.
• With a company car, your potential employer may offer you a fuel card - this will restrict you tofuelling at specified filling stations. If you pay for your fuel and claim it back, your business mileage should be reimbursed, tax free, according to the size of your car - all worked out by theHMRC. Consider though, if your employer funds your private mileage, this will be taxed.
Car allowance
• Your potential employer may offer you an allowance - usually the equivalent cost to that of leasing a company car for you - the amount given to you is taxed as ‘extra salary’.
• You can usually choose your own car although businesses may still impose restrictions on sizeand other specifications; it will be to your financial advantage to choose a car with low C02 emissions.
• You are not tied to a particular car for three years which is the typical company car lease period
• As the car will belong to you, you will be responsible for road tax, maintenance, repairs, breakdown cover and insurance.
• You can claim for any fuel used for business purposes as AMAPs (approved mileage allowancepayments) - at present, the HMRC guidelines are 45p for the first 10,000 miles travelled and 25pper mile thereafter; AMAPs cover the cost of fuel, wear and tear, insurance etc.
Alternatives
• The salary sacrifice scheme does exactly as it says - you sacrifice a portion of your salary in order that your employer uses that money to provide you with a company car. You will not be ableto claim AMAPs - just tax-free business mileage; you will, however, pay less tax as the proportionof your salary sacrificed will not be liable to income tax, only company car tax.
• You may already have a perfectly decent personal car. In this case, you could talk to your potential employer about alternatives to their salary packaging offer. Using your personal car for business means that you can claim AMAPs but you will, of course, be liable for all insurance, roadtax, maintenance, repair and breakdown costs. In this instance, the car is your asset.
Employers
So, you’ve decided to appoint agricultural recruitment specialists Merston Peters to help you findthe right candidate/s for your business and want to offer a competitive salary packaging to enticethe brightest and best candidates that the agricultural arena has to offer. Let’s take a look at whatyou could offer on top of an attractive salary and other benefits:
Company car
• Your new employee will be driving around in a new, reliable, safe, regularly-maintained car thatmeets your expectations in terms of reputation and corporate message
• You can choose the make, size, specification and fuel type of any company car that you offer
• You will be responsible for organising a lease deal and dealing with all administration, financialelements and also for repair, maintenance and breakdown aspects
• In terms of finances, there are capital allowances available on all cars bought by your business;leasing costs can be claimed against your P&L accounts.
• You will need to decide on a fuel policy; whether you will offer a fuel card or accept claims from employees for business mileage.
Car allowance
• Offering a car allowance as an alternative to a company car is a consideration - usually the costwould be similar to the lease cost of a similar company car
• You can have a policy on the type of car you expect your employee to purchase/lease. Considerations would be its safety, the fuel type, specification, engine size, is it fit for purpose and not tooflashy etc - you have health and safety as well as your reputation to take into account
• You will not be responsible for road tax, maintenance, repairs, breakdown cover and insurance - administration is much easier to manage
• You will be responsible for any fuel used for business purposes as AMAPs (approved mileage allowance payments).
Alternatives
• The salary sacrifice scheme does exactly as it says - your employee sacrifices a portion of their salary in order that you use that money to provide them with a company car. This scheme shouldcost your business nothing and you may benefit from NIC savings on the proportion of salary not paid. In some instances businesses choose to pass this on to their employee/s.
As an employer, in all instances in which you are entering into leases, purchases or salary sacrifice schemes, you do need to be clear on what happens in the event of sickness, maternity or the candidate leaving your business. We would advise that policies are put into place with your employees that cover these events; also that any leases have clauses that cover such events.
• Your candidate may prefer to use their personal car. In this case, you should discuss this. Youwill not be responsible for the road tax, maintenance, repair or insurance of the car but you willalso have no control over the type, or reliability of the car.
So, the minefield has been crossed - we hope that this has given you an insight into the alternatives available - any further help that we can offer to both candidates or employers, we’re more than happy to chat.
As a final aside, here are a few fascinating facts:
• A company car peak in 1999/2000 saw 1.61m people in the UK having company cars; latest figures published by HMRC show that in 2011/20112 benefit-in-kind tax was paid on 940,000 company cars.
• According to the Telegraph, top cars with low company car tax are: Ford B-Max, BMW 3-series (and Touring), Lexus NX, Audi A4 Avant, Audi A1, Mercedes E-class Estate, Kia Picanto, Toyota Prius, Auris and Yaris, Nissan Pulsar, Honda Civic (and Tourer), Volvo V60, VW Golf Estate,Skoda Octavia Estate, Seat Leon ST, Peugeot 308 SW and Mazda 6 Tourer.
• The Government’s National Travel Survey shows that in 2012, the average company-owned car travelled more than twice as far as the average privately-owned car. It also showed that the proportion of company-owned cars has fallen slightly from 6% in 2002 to 4% in 2012.
• There is no tax payable on an electric car… let’s all wish for many, many more recharging points!
We’d like to thank Chris Annis of LB Group for his help in providing some of the facts and figures in this article: www.lbgroupltd.com
Martin Thorley, business Principal at Merston Peters has agreed to submit a series of ad-hoc blogs for The Farming Forum and as part of the development of a Careers and Lifelong Learning section
Merston Peters is a full-service recruitment consultancy specialising in agriculture and allied industry assignments
Merston Peters, Unit 4/Old Wool Warehouse, St Andrews Street South, Bury St Edmunds IP33 3PH
01284 752945
www.merstonpeters.co.uk
Historically, company cars have been considered a ‘perk’ for high-achieving employees and a‘must-have’ for anyone in an on-the-road sales role. It’s common knowledge that a company car is considered a benefit in kind by HMRC - especially if it’s used for private, as well as business purposes - both for the employer and the employee. But, we’ve taken a further look at the good, thebad and the downright dastardly from both perspectives - and it doesn’t always just come down to the financial gains/losses:
Employees
So, you’ve visited merstonpeters.co.uk and spotted your dream job - the job description’s a career move you’d like to make; the location is ideal and the salary is certainly in the attractive bracket butthe employer is offering you the choice of a company car or a car allowance - what should youconsider -and are there alternatives?
Company car
• An employer will almost certainly decide upon the type of car offered, or at least some specifications such as an upper price limit; the fuel type; the C02 emission level; the safety aspects - if you have your heart set on a particular car or performance level, this may not be on offer.
• A company car will almost certainly include insurance, road tax, repairs, servicing etc, giving youpeace of mind and hassle-free driving.
• company cars are taxable and the level is calculated using a combination of the list price of the car, its C02 emissions and the fuel type; this figure is then added to your salary and taxed accordingly. As an example, a petrol car with emissions of 74g/km costing £15,000 would give rise to a taxable benefit of £750, whereas another car with the same specifications but emissions of210g/km would give rise to a taxable benefit of £5,250. It’s worth finding out what type of company car your potential employer is offering before making a decision. For further information visithttp://cccfcalculator.hmrc.gov.uk/CCF0.aspx.
• With a company car, your potential employer may offer you a fuel card - this will restrict you tofuelling at specified filling stations. If you pay for your fuel and claim it back, your business mileage should be reimbursed, tax free, according to the size of your car - all worked out by theHMRC. Consider though, if your employer funds your private mileage, this will be taxed.
Car allowance
• Your potential employer may offer you an allowance - usually the equivalent cost to that of leasing a company car for you - the amount given to you is taxed as ‘extra salary’.
• You can usually choose your own car although businesses may still impose restrictions on sizeand other specifications; it will be to your financial advantage to choose a car with low C02 emissions.
• You are not tied to a particular car for three years which is the typical company car lease period
• As the car will belong to you, you will be responsible for road tax, maintenance, repairs, breakdown cover and insurance.
• You can claim for any fuel used for business purposes as AMAPs (approved mileage allowancepayments) - at present, the HMRC guidelines are 45p for the first 10,000 miles travelled and 25pper mile thereafter; AMAPs cover the cost of fuel, wear and tear, insurance etc.
Alternatives
• The salary sacrifice scheme does exactly as it says - you sacrifice a portion of your salary in order that your employer uses that money to provide you with a company car. You will not be ableto claim AMAPs - just tax-free business mileage; you will, however, pay less tax as the proportionof your salary sacrificed will not be liable to income tax, only company car tax.
• You may already have a perfectly decent personal car. In this case, you could talk to your potential employer about alternatives to their salary packaging offer. Using your personal car for business means that you can claim AMAPs but you will, of course, be liable for all insurance, roadtax, maintenance, repair and breakdown costs. In this instance, the car is your asset.
Employers
So, you’ve decided to appoint agricultural recruitment specialists Merston Peters to help you findthe right candidate/s for your business and want to offer a competitive salary packaging to enticethe brightest and best candidates that the agricultural arena has to offer. Let’s take a look at whatyou could offer on top of an attractive salary and other benefits:
Company car
• Your new employee will be driving around in a new, reliable, safe, regularly-maintained car thatmeets your expectations in terms of reputation and corporate message
• You can choose the make, size, specification and fuel type of any company car that you offer
• You will be responsible for organising a lease deal and dealing with all administration, financialelements and also for repair, maintenance and breakdown aspects
• In terms of finances, there are capital allowances available on all cars bought by your business;leasing costs can be claimed against your P&L accounts.
• You will need to decide on a fuel policy; whether you will offer a fuel card or accept claims from employees for business mileage.
Car allowance
• Offering a car allowance as an alternative to a company car is a consideration - usually the costwould be similar to the lease cost of a similar company car
• You can have a policy on the type of car you expect your employee to purchase/lease. Considerations would be its safety, the fuel type, specification, engine size, is it fit for purpose and not tooflashy etc - you have health and safety as well as your reputation to take into account
• You will not be responsible for road tax, maintenance, repairs, breakdown cover and insurance - administration is much easier to manage
• You will be responsible for any fuel used for business purposes as AMAPs (approved mileage allowance payments).
Alternatives
• The salary sacrifice scheme does exactly as it says - your employee sacrifices a portion of their salary in order that you use that money to provide them with a company car. This scheme shouldcost your business nothing and you may benefit from NIC savings on the proportion of salary not paid. In some instances businesses choose to pass this on to their employee/s.
As an employer, in all instances in which you are entering into leases, purchases or salary sacrifice schemes, you do need to be clear on what happens in the event of sickness, maternity or the candidate leaving your business. We would advise that policies are put into place with your employees that cover these events; also that any leases have clauses that cover such events.
• Your candidate may prefer to use their personal car. In this case, you should discuss this. Youwill not be responsible for the road tax, maintenance, repair or insurance of the car but you willalso have no control over the type, or reliability of the car.
So, the minefield has been crossed - we hope that this has given you an insight into the alternatives available - any further help that we can offer to both candidates or employers, we’re more than happy to chat.
As a final aside, here are a few fascinating facts:
• A company car peak in 1999/2000 saw 1.61m people in the UK having company cars; latest figures published by HMRC show that in 2011/20112 benefit-in-kind tax was paid on 940,000 company cars.
• According to the Telegraph, top cars with low company car tax are: Ford B-Max, BMW 3-series (and Touring), Lexus NX, Audi A4 Avant, Audi A1, Mercedes E-class Estate, Kia Picanto, Toyota Prius, Auris and Yaris, Nissan Pulsar, Honda Civic (and Tourer), Volvo V60, VW Golf Estate,Skoda Octavia Estate, Seat Leon ST, Peugeot 308 SW and Mazda 6 Tourer.
• The Government’s National Travel Survey shows that in 2012, the average company-owned car travelled more than twice as far as the average privately-owned car. It also showed that the proportion of company-owned cars has fallen slightly from 6% in 2002 to 4% in 2012.
• There is no tax payable on an electric car… let’s all wish for many, many more recharging points!
We’d like to thank Chris Annis of LB Group for his help in providing some of the facts and figures in this article: www.lbgroupltd.com
Martin Thorley, business Principal at Merston Peters has agreed to submit a series of ad-hoc blogs for The Farming Forum and as part of the development of a Careers and Lifelong Learning section
Merston Peters is a full-service recruitment consultancy specialising in agriculture and allied industry assignments
Merston Peters, Unit 4/Old Wool Warehouse, St Andrews Street South, Bury St Edmunds IP33 3PH
01284 752945
www.merstonpeters.co.uk