Publication of the 2017 Finance Bill has caused sleepless nights among UK fleet decision makers who are rightly concerned with the lack of clarity, practical implementation and unintended consequences of recent government decisions.
So far the debate has gravitated around the salary-sacrifice changes, or Optional Remuneration Arrangements. In recent weeks we have heard concerns about the practical implications of the changes, such as the inability of HMRC systems to handle P46 and P11D reporting changes until 2018 or even 2019. But in boardrooms and HR departments across the UK there is a more strategic discussion following the Finance Bill: Cash or car?
The changes are forcing companies to review and reduce company car options for employees. Where a company may once have offered a cash option or a vehicle, it now has to offer either cash or a car.
With the complexities and responsibilities that come with providing company cars, many companies are questioning whether to go down the apparently simplified route of offering solely a cash option.
This, in my view would be a big mistake and very short-sighted in view of the longer term consequences. It would be easy for fleet decision makersto think of company car programmes as more hassle than they’re worth. But this takes for granted the benefits such schemes provide to organisations, not just to their employees.
It is difficult to put a cost on the financial and legal value of a company car programme. The visibility, control and ability to deliver against duty of care that such schemes provide are invaluable. Aside from the significant benefits for recruitment and retention, the value of a company car programme to an organisation is only truly understood when it is not there or something goes wrong.
It is worth remembering that even by switching to a cash-only scheme, the company still retains duty-of-care obligations for employees using these vehicles for business travel. How will you know if your employee has insured, maintained and serviced a vehicle correctly? How will you know the environmental impact of these journeys?
Unlike company car drivers, cash buyers have little incentive to make the right choices in terms of fuel economy or environmental impact. From the employee driver perspective, it’s easy to hear about company car tax rises and think the grass is greener as a cash buyer. It is perhaps until you do the maths in terms of servicing, maintenance, insurance (do not forget to include ‘business use’) and all the other costs you previously have not had to consider as a company car driver.
It all adds up, and a set of new tyres is a considerable, sometimes unexpected outlay. A company car is still a great package if you choose the right vehicle in terms of emissions, fuel economy and – following the VED changes – list price.
Organisations need to review their approaches and consider treating essential users and perk drivers in the employee population differently to accommodate the changes. Restating the real-world benefits of a company car package to employees is also
Similarly, do not let senior managers who have previously opted for cash cloud your judgement on the car scheme for your whole organisation. The company car is only a small part of the corporate machine, but without it working efficiently and safely, the whole machine can quickly come to a halt.
There is no doubt that fleet decision makers need to take action following the changes. Doing nothing is not an option, but fleet owners need to avoid making a knee-jerk decision into choosing a cash-only car policy.
David Bushnell, Alphabet GB