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Salary sacrifice schemes ‘a cost effective’ solution despite new rules, say LeasePlan

Salary sacrifice schemes ‘a cost effective’ solution despite new rules, say LeasePlan

Salary sacrifice car schemes will continue to provide “a cost effective way” for employees to drive a new, insured, fully maintained vehicle, according to LeasePlan.  
Following publication of the 2017 Finance Bill, legislation will come into effect, as expected, from 6 April to limit the income tax and employer National Insurance advantages of car salary exchange arrangements and where a car or cash allowance option is available.  

Called Optional Remuneration Arrangements (OpRA) by HM Revenue and Customs, there will be no distinction made between salary sacrifice and cash or car in terms of how the rules will be applied with employees taxed on either the value of the cash allowance or the taxable value of the company, whichever is the higher. Ultra-low emission vehicles (75g/km or less) are exempt from the new rules.  

Matthew Walters, head of consultancy services at LeasePlan UK, claimed the new rules would not have “a big impact on employees”.  

He said: “Whilst it depends on a number of scheme design elements, the fact of the matter is; that whilst the vast majority of new salary sacrifice car drivers will see an increase in costs, this is marginal and in most cases it is a matter a few pounds a month.  

“Salary sacrifice for car schemes, where available, still represent a cost effective way of driving a brand new, insured, fully maintained vehicle. Plus, employees have the surety of provision by employers using their supplier partnerships to ensure drivers get the best service possible. Employers also need to consider that these schemes are not governed by size of employee base and can be introduced at little or no cost and no risk.  

“Whilst the legislation does introduce an added degree of complexity, responsible providers simply need to provide drivers with the right degree of transparency in their quotation tools and tax calculators (for both salary sacrifice and/or where drivers have the option of cash or car) to allow employees to make the right choice, based on the right information. They also need to provide employers with the right P11D information to make reporting to HM Revenue and Customs as straightforward as possible.

“LeasePlan UK remains committed to salary sacrifice for car schemes and in readiness for the changes, all our quoting tools and tax calculators will be updated with the new rules over the first weekend in April ahead of the tax year change. This will include cash allowance comparisons, where appropriate, and will provide full transparency over the period of the contract. Our whole life cost (WLC) engines will also be changed to reflect the correct Class 1A National Insurance contributions costs based on the cash allowance in play or the company car tax value.”  

LeasePlan will also be implementing a new on-line digital tax guide in association with Deloitte which fleet managers and drivers will be able to access to understand the new rules in more detail.  

Later in the year LeasePlan will be publishing its annual Fleet Funding Guide which will provide a comprehensive view on the fleet and tax landscape. To reserve a copy of the guide go to www.easiertoleaseplan.co.uk