WE may still be in lockdown but HMRC said company car drivers must still pay their Benefit-in-Kind tax bills as they have access to private use of their vehicles.
HMRC advice says: “The benefit charge applies where a car is made available for private use, whether or not it is so used. For example, a car kept on an employee’s driveway during a period of furlough would still be considered to be made available. “
The new April 2020 BIK tax system incentivises electric cars and those with CO2 emissions of less than 50g/km, so there are valid reasons why drivers could prefer now, and going forward, to be in low-emitting cars.
Birmingham-based Fleet Logistics said now could be an ideal time to review fleet policy to look at introducing a number of new, tax-efficient vehicles to choice lists for drivers to consider when we come out of lockdown.
From a Corporate Social Responsibility (CSR) perspective, this measure should also help mitigate against the higher CO2 ratings that the new WLTP emissions system will bring in.
New, low-emitting, tax-beating vehicles could encourage cash drivers back into the corporate fleet, which could help to improve company control and reduce the risk posed by grey fleet vehicles.
Sue Branston, Country Head for Fleet Logistics UK and Ireland, commented: “The key thing is to speak with your fleet management provider and get as much advice as possible on your specific fleet and circumstances.
“Given the myriad of options available, your provider should be reviewing every area of spend – large and small – as well as looking at mileage parameters and contract extensions to reduce and manage costs.
“Ensuring that actual mileages are being used to write lease contracts, not simply relying on pooled mileages to manage excess of under mileages is crucial for accurate budgeting – particularly if you find yourself in an ongoing rolling credit basis, but never actually receive the credit,” she said.
Support your drivers
The impact of Covid-19 on household incomes could mean that some drivers may not want to have the responsibility for a leased car or salary sacrifice car and have this as a monthly outgoing.
Currently, HMRC rules allow for employees to opt out of a salary sacrifice car arrangement where a lifestyle change, such as marriage, divorce or a partner becoming redundant or pregnant, significantly alters their financial circumstances.
The Government has now changed its ruling on salary sacrifice and allowed drivers who opted for a car under this type of scheme to hand it back in favour of having the cash sum previously sacrificed instead, provided their circumstances have changed as a direct result of coronavirus.
Companies may need to be prepared to support their drivers in any way possible during the current crisis and be as sympathetic as possible to their position, even if it means that they may face early termination charges from their leasing provider.
Consider sale and leaseback
For companies that own their own vehicles, a sale and leaseback arrangement can be a good way of realising some much-needed cash flow for the business.
With a sale and leaseback agreement, an organisation frees the capital tied up in its owned vehicles by selling them to a leasing company and contract hiring them back for an agreed monthly rental. This releases capital and, currently, cash is king.
The business gains the advantage of fixed monthly expenditure, which can include maintenance, tyres and servicing so that full fleet costs can also budgeted for, giving true fixed cost motoring.
Lease rentals are corporation tax deductible, which helps remove the burden of any existing banking arrangements so that released cash can be used elsewhere in the business.
At the same time, the business no longer bears the financial risks associated with vehicle depreciation or the concern around residual values, which, with a recession on the horizon, may not be a desirable position for a business.
