Employee car schemes at a crossroads, says new survey
A growing number of employees are considering opting out of employer-provided
car schemes if benefit-in-kind tax increases still further, according to the
results of a new survey.
At the same time, tax and cost implications of selecting a
new car outweigh any environmental considerations. And 78% of employees say
they are unlikely to choose an ultra-low emission vehicle (ULEV) if the tax
incentives are removed.
They are some of the findings from a new study carried out
on behalf of vehicle and asset finance specialist, Maxxia Group, which
contacted employees currently provided
with a car under a salary sacrifice car scheme, those driving a traditional
company car, and those who had opted to take a cash alternative.
Although car schemes have traditionally been a very
attractive benefit, changes in tax treatment introduced by HM Revenue and Customs
following the Autumn Statement and confirmed in this week’s Finance Bill, may
impact on how employee car schemes are run in the future.
Maxxia researchers wanted to find out what the impact the
changes were likely to be on employees.
The results showed that some 92% of employees viewed
employer-provided car schemes as a positive benefit. But 70% say they would
consider opting out and taking a cash alternative if car tax levels increased still
further, suggesting that the sector was on the brink of a tipping point,
according to Maxxia.
When asked what the main reasons were for remaining part of
an employer-provided car scheme:
32% of respondents said it was because
they got to drive a better car
23% said it was because it was tax
22% said it was easier than running
their own car.
However, being tax advantageous was more important to employees
than being environmentally-friendly, and some 78% of respondents said they were
less likely to choose a ULEV if the tax advantages were removed.
A recent study by the British Vehicle and Rental and Leasing
Association showed that only 3% of employees currently chose a ULEV with carbon
emissions of less than 75g/km, while the average CO2 emissions level of new
cars was currently around 121g/km.
The survey also investigated exactly what employees valued
from an employee car scheme - and what they didn’t. Respondents said that the
perfect employee car scheme would have four characteristics.
It would have a wide choice of vehicles
It would be tax efficient
It would include flexibility in terms
of length, mileage and vehicle
And it would provide certainty over
Employees were also aware of the benefits that employee car
schemes offered them, including all-inclusive packages including comprehensive
motor insurance, full servicing, easy processing and the full support of the
The study asked respondents about their reasons for opting
out of employee car schemes.
Some 32% said they were attracted by the ‘cold hard cash’
with a further 28% saying it was to get a better choice of car.
Gordon Calder-Jones, director of Maxxia, said: “The study
provided a fascinating insight into the thinking of employees within employee
car schemes and those who have opted to take a cash alternative.
“Employee car and cash allowance schemes have been the
target of changes to the tax rules by HM Revenue & Customs in recent
months, so it was very illuminating to see how employees would react following
the announcements made at the last Autumn Statement.
“What was clearly apparent was how finely balanced the
decision regarding being part of an employee car scheme and opting out was,
following the changes. While an overwhelming majority of employees still see
the car as an attractive benefit, any further tax increases are likely to tilt
the balance dramatically.
“And it was also very evident that financial rather than
environmental considerations were of the most importance for employees in
making any kind of choice.”