As we move into the final month of 2015/16 tax year, we as responsible employers and employees need to be considering what we do about our next car. Do you take the cash and do your own thing or do you take a car from the company car scheme? The changes in the budget last year mean that those that had picked a diesel car thinking the 3% levy would be removed are now having to comfort themselves with the fact that it is going to remain and the car tax liability will only increase. Therefore as an employer or employee you need to think carefully about what car is going to be picked next.
If you are an employer then you need to consider what you put on your car list, is it a diesel only policy? If so can this be changed? In all the press recently it talks about how popular PHEV (plug-in Hybrid Electric Vehicles) vehicles are becoming popular on everyone’s choice list and eventually it will be 1 in 3 people’s choice. So as an employer you need to consider what vehicles are on your list and can you accommodate the PHEV on your list?
Employees then can have a choice, but if they start walking down the PHEV route then as an employer you need to point out the options open to them with charging and how they do this to get the real benefits of any PHEV. It is worth also considering linking up with Energy Savings Trust to understand what grants are available and how you as employers can support your employees as well as suppliers to put these charging points in at work and how they could work at home.
When we click over to 16/17 tax year then your NI (National Insurance) costs as an employer will increase and your employee’s BIK (Benefit in Kind) will increase, it is worth ensuring that all employees are aware that the 3% diesel levy remains and those that choose a diesel car thinking this will be removed and their tax reduced will be disappointed so a short note to explain what has happened and why will help them understand and stop that phone from ringing post April.
If you as an employer offer cash, do you know the cost of this and the impact it is having on getting employees to use their own vehicles for business use. For a start you will pay 45p per mile instead of the 8p or 10p per mile. So as well as paying cash you are paying 35p per mile more for them to use their private car. 10,000 miles this is a cost of £3,500 per year.
Most employees will move to cash because their car of choice isn’t on your list. Also they would have done the maths to understand what their liabilities are with tax and what they will get as a cash taker and most companies when setting cash allowances won’t do this calculation themselves so often set the cash allowance high.
Finally, if you have a number of cash takers and grey fleet users ask yourselves… when you look out the window what cars are running on business. Do you know? Do they have the correct insurance? What cost in Co2 is this going to have on your reporting duties as a business? It is all about having the right processes and procedures in place.