Company Car - is this right?

dirtychinchilla

dirtychinchilla

dirtychinchilla

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Woking
So my wife just started a new job at the local council. She's being given a car allowance of £2,600 pa.

They've informed her that she sends the criteria of what she's looking for, and then they find leases that meet her requirements. I'm guessing the trawl through lease sites finding these cars instead of having a deal with someone.

That's fine. But then if it exceeds the car allowance, she has to make it up. Whilst understandable, that's pretty rubbish IMO. They want to her to drive for work, they should pay for it in full. The fact that she can use it outside of work to me is an incidental benefit.

Assuming all that is fine, they've told her that if she leaves the job before the lease is up, she'll have to pay out the rest of the lease. Is this normal? Is it even legal? Seems like another way to shaft your employees.

Thanks in advance.
 
Maybe I'm missing something, but aren't a company car and a car allowance two different things?

One provides you with a car and you pay the BIK tax on it, and the other provides you with a monthly allowance which is designed to be sufficient for you to run a suitable car for your work, and it's up to you if you want to pay the extra to get a fancier car. In both cases you claim the 12p/mile or whatever for fuel.

If it's the latter, can she not just take the money and do with it what she pleases (assuming the car meets the requirements, e.g. under 5 years old)?
 
Howard said:
Maybe I'm missing something, but aren't a company car and a car allowance two different things?

One provides you with a car and you pay the BIK tax on it, and the other provides you with a monthly allowance which is designed to be sufficient for you to run a suitable car for your work, and it's up to you if you want to pay the extra to get a fancier car. In both cases you claim the 12p/mile or whatever for fuel.

If it's the latter, can she not just take the money and do with it what she pleases (assuming the car meets the requirements, e.g. under 5 years old)?
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So I believe she has the allowance, which can be put towards a car that they will lease on her behalf. I have no idea whether they pay the deposit or not. You would assume so otherwise £2,600 isn't going to get anything!

Then they will pay the monthly allowance straight towards the car on her behalf, and anything it costs over and above that would come out of her wages.

She can take the money, but how the hell can you buy a car that's under 5 years old etc with £2,600?
 
That is a particularly stingy 'allowance', though when it comes to allowances, it's effectively just extra salary, it's materially barely any different being offered £25,000+£2,500 or £27,500 (pension contributions, NI etc. will vary slightly if some money is ringfenced as not salary).

It doesn't sound like she's being offered a company car so much as access to a salary sacrifice scheme to lease a car, though structured in such a way the expected behaviour is that she'll sacrifice the allowance of £2,600. It's important to clarify the difference as the tax implications can be different since the rules on salary sacrifice car schemes were changed.
 
Kenai said:
That is a particularly stingy 'allowance', though when it comes to allowances, it's effectively just extra salary, it's materially barely any different being offered £25,000+£2,500 or £27,500 (pension contributions, NI etc. will vary slightly if some money is ringfenced as not salary).

It doesn't sound like she's being offered a company car so much as access to a salary sacrifice scheme to lease a car, though structured in such a way the expected behaviour is that she'll sacrifice the allowance of £2,600. It's important to clarify the difference as the tax implications can be different since the rules on salary sacrifice car schemes were changed.
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Incredibly stingy. To be honest, I feel like she's constantly being shafted. Along with this allowance, she receives a "flexible benefit" of something like £1,500. But, they don't have a company car park at the moment. Therefore nearly £800 of that benefit is put towards a car park pass, if she wants one. Of course, she's going to have to have one so she can park anywhere near her office!

But, she's very fortunate to have found a job since being made redundant in September. And really, we just want her to be in a job for maternity pay, which is actually very good at the council. Furthermore, they put 15% into her pension.

I have no idea whether it's a salary sacrifice or not. I'm most concerned that she may lose her job for some reason and end up having to see out a lease on a car.
 
dirtychinchilla said:
Incredibly stingy. To be honest, I feel like she's constantly being shafted. Along with this allowance, she receives a "flexible benefit" of something like £1,500. But, they don't have a company car park at the moment. Therefore nearly £800 of that benefit is put towards a car park pass, if she wants one. Of course, she's going to have to have one so she can park anywhere near her office!

But, she's very fortunate to have found a job since being made redundant in September. And really, we just want her to be in a job for maternity pay, which is actually very good at the council. Furthermore, they put 15% into her pension.

I have no idea whether it's a salary sacrifice or not. I'm most concerned that she may lose her job for some reason and end up having to see out a lease on a car.
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It's this concept of her being responsible for paying out a lease that makes me suspect it's actually some sort of salary sacrifice rather than an actual company car.

A company car would just be provided, possibly with minimal choice in what you actually get, and should you leave the company keeps it. No real complication involved.

If it's a salary sacrifice lease, then it's you personally leasing that car but the company paying for it by using your pre-tax salary so you can get 'more for your money' (albeit tax rules were changed that mean this isn't a huge advantage anymore, worth reading up on this carefully if this is indeed what the arrangement is). It can also have implication on pensions etc. as standard with salary sacrifice arrangements. It's quite common for the employee to be on the hook for seeing out the lease in this case, as what the company is offering here is not really a company car but a scheme to allow you to personally lease a car cheaper due to small tax benefits - you are still personally signing up to a car lease that you are responsible for.

Edit - based on your location being 'Woking', i've taken a guess at this being Woking Borough Council, who have a copy of their Employee Handbook available online (albeit not dated), which says:

3.2 Vehicles
3.2.1 Car leasing scheme
The car leasing scheme will be open to all employees who will be able to offset the annual cost of a leased vehicle against all or part of their flexible benefit. Any further
cost can be met directly from salary deductions. Any vehicle will need to meet the Council’s environmental and safety criteria:

The CO2 emissions limit is set at 135g/km with effect from 1 October 2018
NCAP 5 safety rating

3.2.2 Vehicle allowance
The Council recognises that some roles require essential items in order for them to be carried out effectively and efficiently. These items may include a vehicle where no other methods of transport are available or practical. Therefore the Council will provide an additional job related vehicle allowance to roles where it has been agreed by the Corporate Management Group that a vehicle is required.
The current lease car criteria are:
The CO2 emissions limit is set at 135g/km with effect from 1 October 2018
NCAP 5 safety rating

As an alternative to a lease car you can choose the cash alternative option. The amount paid is dependent on the CO2 emissions of your vehicle. A list will be made available in your Contract of Employment.
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...so I suspect it is infact a lease scheme, not a company car.

edit - a slightly different version of the same handbook says:

3.2 Vehicles 3.2.1 Car leasing scheme The car leasing scheme will be open to all employees who will be able to offset the annual cost of a leased vehicle against all or part of their flexible benefit. Any further cost can be met directly from salary deductions. Any vehicle will need to meet the Council’s environmental and safety criteria:  C02 emissions no greater than 130g/km, and a limit of 120g/km from April 2016 and 110g/km from April 2018, subject to feasibility review  Euro 5  NCAP 5 safety rating (The 10 year age limit exemption for cash alternative vehicles will continue to apply to employees employed pre 1 April 2011). 3.2.2 Vehicle allowance The Council recognises that some roles require essential items in order for them to be carried out effectively and efficiently. These items may include a vehicle where no other methods of transport are available or practical. Therefore the Council will provide an additional job related vehicle allowance to roles where it has been agreed by the Corporate Management Group that a vehicle is required and the flexible benefit fund is not adequate to secure the vehicle. Employees can elect to take a cash alternative at 80% and provide a suitable vehicle for work purposes. All vehicles must comply with Council environmental and safety standards as outlined above. Employees on grades W7 and above will receive a flexible benefit which incorporates provision for a vehicle. Again employees can elect to take a cash alternative at 80%, subject to the normal deductions and, if required by the role undertaken, must provide a suitable vehicle for work purposes. The vehicle allowance is not pensionable.
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Kenai said:
It's this concept of her being responsible for paying out a lease that makes me suspect it's actually some sort of salary sacrifice rather than an actual company car.

A company car would just be provided, possibly with minimal choice in what you actually get, and should you leave the company keeps it. No real complication involved.

If it's a salary sacrifice lease, then it's you personally leasing that car but the company paying for it by using your pre-tax salary so you can get 'more for your money' (albeit tax rules were changed that mean this isn't a huge advantage anymore, worth reading up on this carefully if this is indeed what the arrangement is). It can also have implication on pensions etc. as standard with salary sacrifice arrangements. It's quite common for the employee to be on the hook for seeing out the lease in this case, as what the company is offering here is not really a company car but a scheme to allow you to personally lease a car cheaper due to small tax benefits - you are still personally signing up to a car lease that you are responsible for.

Edit - based on your location being 'Woking', i've taken a guess at this being Woking Borough Council, who have a copy of their Employee Handbook available online (albeit not dated), which says:

...so I suspect it is infact a lease scheme, not a company car.
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OK, that makes a lot more sense to me now, so thanks for that. You are right, it's Woking council. What happens with the deposit though?

I lease my own car and we had to put down a huge deposit, more than her whole allowance.
 
dirtychinchilla said:
OK, that makes a lot more sense to me now, so thanks for that. You are right, it's Woking council. What happens with the deposit though?

I lease my own car and we had to put down a huge deposit, more than her whole allowance.
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I suspect there would be no 'deposit' involved the way these schemes are typically setup.

As I edited in above, there are a few different versions of the handbook floating about saying slightly different things, obviously base any of your decision making on a copy she's issued by her work, not one found online.
 
Kenai said:
I suspect there would be no 'deposit' involved the way these schemes are typically setup.
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So even lower value I suppose. I can understand why you might want to sacrifice a bit of your salary for a better car. What frustrates me is that if we have children, my car is set up better for that. It's much bigger than what she'd get from a lease. Do you think we could just swap cars in that case?

Kenai said:
As I edited in above, there are a few different versions of the handbook floating about saying slightly different things, obviously base any of your decision making on a copy she's issued by her work, not one found online.
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Yeah I need to get the most recent handbook. Thank you for that though. My guess is that she wouldn't want to rock the boat to much and will just suck it up, which I understand. She's probably going to end up with a tiny car though.
 
What you want to watch with the lease scheme is the tax implications - I believe it's now something like you pay either the BIK on the car or the equivalent income tax on the salary you have sacrificed, whichever is higher (ULEVs excluded I think).

Don't panic about deposits, it's far more likely the deals on offer are 1+35 or 1+47 structure, whereas your personal deal was likely something like 6+35.
 
Do she not have access to a salary sacrifice scheme through the employer? We use NHS Fleet solutions. They'd have something in budget with no deposit. Tax, insurance and maintenance included.
 
Right now, I can't answer the question.

They don't appear to have a fleet either.

Good to hear we won't need to worry about a deposit. I'd done some awful maths and for some reason thought it was £120 a month. £216 is much better! Just got to encourage the wife to get car worth having.
 
dirtychinchilla said:
Right now, I can't answer the question.

They don't appear to have a fleet either.

Good to hear we won't need to worry about a deposit. I'd done some awful maths and for some reason thought it was £120 a month. £216 is much better! Just got to encourage the wife to get car worth having.
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Depends on how they run things. Go back about 3 years and we had company cars for certain jobs and as a management perk with a fleet department that dealt with it along with the commercial fleet. Then the personal vehicle facility got managed out over the course of a couple of years. Now NHS fleet is available to all via salary sacrifice as a tax perk, subject to sensible limitations. Like an upper CO2 limit, also you can't earn £15k a year and go for a £500 a month car for example...
 
Is there no option to keep and use her current car (if she has one), or has it got to be a leased car through the salary sacrifice scheme.

I used to work at the council and the common arrangement was that you provided your own vehicle (with no real limits imposed, as long as it was road worthy).

The distinction they made was either "essential" or "casual" car user that defined if you got an allowance, parking provided etc. (i.e. casual only got paid for the mileage they undertook, no parking provided and it wasn't a contractual term to have a car, whereas an essential user had to have a car available, got an allowance and was provided with a parking space at the work site, but got the lower rate of mileage).

If it has to be the salary sacrifice scheme I believe she will be subject to extra taxation similar to the company car BIK rates, with the double whammy that it will also affect the level of pension contributions the employer will make due to the effective lower salary.
 
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