Ford Management Role Cars and HMRC
Discussion
akadk said:
a lot of wrongs in the thread
as said
its ECO
employee car ownership
as said, effectively is a PCP
car is sold to the employee at a really low price
consideration to Ford is via their finance partner who loan the money to the employee at zero interest
the term is really short
the GFV is the original sales price
the employee hands back the car at end of term to settle the loan
monthly payments via salary cover the insurance & maintenance side.
there is a BIK liability for the interest free loan as that is technically the only benefit here from HMRC's perspective
the employee does OWN the car, but its registered to the OEM
the JLR scheme isn't at zero interest, so the monthly salary deductions are higher as they charge interest on the loan, which effectively means there's no BIK liability as they are paying it monthly
Thanks for this, it makes sense, from my perspective. as said
its ECO
employee car ownership
as said, effectively is a PCP
car is sold to the employee at a really low price
consideration to Ford is via their finance partner who loan the money to the employee at zero interest
the term is really short
the GFV is the original sales price
the employee hands back the car at end of term to settle the loan
monthly payments via salary cover the insurance & maintenance side.
there is a BIK liability for the interest free loan as that is technically the only benefit here from HMRC's perspective
the employee does OWN the car, but its registered to the OEM
the JLR scheme isn't at zero interest, so the monthly salary deductions are higher as they charge interest on the loan, which effectively means there's no BIK liability as they are paying it monthly
I know that this sounds like I have sour grapes, but I don't. I worked for FMC as their European Warranty Operations Manager, so I am not totally alien to MR scheme, but I was more interested in their HMRC aspect, as now I have my own business and I am interested in offering my employees a company car - and if Ford can make it work, then why cant we? It seems is a massive TAX minimisation scheme, and helps get their cars in to dealers quicker. Also, as with most large businesses they seem to have 'arrangements' with HMRC which boils my piss!
Extra 300 Driver said:
I was more interested in their HMRC aspect, as now I have my own business and I am interested in offering my employees a company car - and if Ford can make it work, then why cant we?
Because Ford make cars, and you don't.You are free to provide cheap aerospace warranties to your employees without creating a taxable benefit, something Ford employees will sadly miss out on.
akadk said:
a lot of wrongs in the thread
as said
its ECO
employee car ownership
as said, effectively is a PCP
car is sold to the employee at a really low price
consideration to Ford is via their finance partner who loan the money to the employee at zero interest
the term is really short
the GFV is the original sales price
the employee hands back the car at end of term to settle the loan
monthly payments via salary cover the insurance & maintenance side.
there is a BIK liability for the interest free loan as that is technically the only benefit here from HMRC's perspective
the employee does OWN the car, but its registered to the OEM
the JLR scheme isn't at zero interest, so the monthly salary deductions are higher as they charge interest on the loan, which effectively means there's no BIK liability as they are paying it monthly
^This.as said
its ECO
employee car ownership
as said, effectively is a PCP
car is sold to the employee at a really low price
consideration to Ford is via their finance partner who loan the money to the employee at zero interest
the term is really short
the GFV is the original sales price
the employee hands back the car at end of term to settle the loan
monthly payments via salary cover the insurance & maintenance side.
there is a BIK liability for the interest free loan as that is technically the only benefit here from HMRC's perspective
the employee does OWN the car, but its registered to the OEM
the JLR scheme isn't at zero interest, so the monthly salary deductions are higher as they charge interest on the loan, which effectively means there's no BIK liability as they are paying it monthly
MB had 2 schemes in operation when I was there. I had a car under each.
The first scheme was not open to all employees but a perk for those of a certain seniority.
MB sold me a car at a discounted price (say, £25k instead of £30k). As long as this discounted price was above the wholesale price of the car then no benefit was incurred.
The car was paid for with a loan from MB Finance. I made no repayments on the loan.
After 6 months or 6,000 miles I sold the car back to then at the price I paid for it and settled the loan with MB Finance.
Insurance, VED and maintenance was provided by MB (although the cars never needed re-taxing or servicing). An average insurance premium (c.£600) plus a years VED and an annual service was charged to each employee in the scheme and collected from their monthly salary in equal instalments.
The only taxable benefit was from the interest free loan provided by MB Finance to buy the car. At the time the HMRC nominal interest rate for interest free loans was 4%. Therefore, £1k (4% of £25k) was added to my P11d as a benefit in kind.
The cost to the employee was £75 per month for the insurance, VED and servicing and tax at either 20% or 40% on the £1k BIK. Therefore, the total cost was £92-£108/month for a £30k car.
The other scheme was open to all employees but instead of an interest free loan I had to make monthly repayments to cover the interest and I was responsible for insuring, taxing and maintaining the car. Therefore, no taxable benefit was provided.
Extra 300 Driver said:
rsbmw said:
It's not a joke, you too are free to sell your products to your employees at a substantial discount, with no BIK implications.
Yes it is as it was directed at my situation, in which we have no product to sell to employees.I work in a firm providing B2B services only, so also cannot benefit from this.
If it's any consolation, consider that your competitors will also not be able to provide in-house benefits to their employees (unless of course they are part of a larger organisation which offers other products and services, e.g. a diversified insurance firm which also sells personal lines)
Extra 300 Driver said:
Can someone explain how this works, I just don’t get it, but I clearly see that ford use it to flood the market with used cars, at good specs
Here is the trick you are missing: the manufacturers intentionally use these schemes to actively manage the residuals of well-spec'd, low-mileage, known history cars to feed into their dealer network. It is all about protecting residuals, plus, as pointed out above, being able to offer a massive perk, which many people find to be an incredible set of golden handcuffs. ralphrj said:
^This.
MB had 2 schemes in operation when I was there. I had a car under each.
The first scheme was not open to all employees but a perk for those of a certain seniority.
MB sold me a car at a discounted price (say, £25k instead of £30k). As long as this discounted price was above the wholesale price of the car then no benefit was incurred.
The car was paid for with a loan from MB Finance. I made no repayments on the loan.
After 6 months or 6,000 miles I sold the car back to then at the price I paid for it and settled the loan with MB Finance.
Insurance, VED and maintenance was provided by MB (although the cars never needed re-taxing or servicing).
Mate of mine works for Vauxhall and above is exactly how he described their scheme. He "buys" the car on an interest free loan and then "sells" it back, but no money ever actually changes hands. The thing I thought was odd (bearing in mind he owns the car) is that insurance is included too. All he has to do is put fuel in it. There's no tax liability.MB had 2 schemes in operation when I was there. I had a car under each.
The first scheme was not open to all employees but a perk for those of a certain seniority.
MB sold me a car at a discounted price (say, £25k instead of £30k). As long as this discounted price was above the wholesale price of the car then no benefit was incurred.
The car was paid for with a loan from MB Finance. I made no repayments on the loan.
After 6 months or 6,000 miles I sold the car back to then at the price I paid for it and settled the loan with MB Finance.
Insurance, VED and maintenance was provided by MB (although the cars never needed re-taxing or servicing).
Compared to the other schemes described here his works quite differently - they call him after he's had the car around 4 months and offer him a fairly limited choice of models and colours and he has to choose one of those for his next one. Sometimes they'll ask for his car back at very short notice and he'll get a new one early.
Sheepshanks said:
Mate of mine works for Vauxhall and above is exactly how he described their scheme. He "buys" the car on an interest free loan and then "sells" it back, but no money ever actually changes hands. The thing I thought was odd (bearing in mind he owns the car) is that insurance is included too. All he has to do is put fuel in it. There's no tax liability.
If you're a manufacturer your insurance will cover Christ knows how many cars, so having staff cars on there won't make a jot of difference. You'll also know that a) the staff cars are insured b) they're insured properly and c) saves on having head count for someone to check a and bSheepshanks said:
Compared to the other schemes described here his works quite differently - they call him after he's had the car around 4 months and offer him a fairly limited choice of models and colours and he has to choose one of those for his next one. Sometimes they'll ask for his car back at very short notice and he'll get a new one early.
They'll more than likely be offered something from stock that's not far off going overage (i.e in stock for 90 or 180 days). If your car is called back early it's probably because there is a lack of used ones within the networkExtra 300 Driver said:
My point is that its a benefit of working for Ford, so, just like any other business, your benefits are taxed. I have private health taxed, I have my work summer parties taxed. Everything is taxed! So if I give my position within my business a 'perk' of a highly discounted company car, I wont have to pay tax? Of course I would! So how does it work for Ford?
Life isn't fair when you play by the rules. Regarding the above I can't tell you the exact reason why because I don't know. But being management at Ford I do know you have to jump through hoops and never say no to a s
te situation even when the obvious is the best solution. If you are that friendly with this person ask them direct how does it work. Within Ford the pay structure beyond hourly paid is closely guarded. If you are connected with certain how can I say common meeting points you may get a better answer 
akadk said:
The only fact here is the fact you are wrong
THIS IS FACT
What part of ECO scheme did you not understand?
.... Oh, the last word.
HOW IT WORKS
ECO schemes entail employers offering employees a monthly salary allowance to spend on a car of their choice. This allowance is generally based on the employee's grade, tax bracket and annual business mileage.
Vehicles within an ECO scheme are sold directly to employees through a credit sale agreement, with contract terms and mileage limits to suit them. Employees do not pay BIK tax, as is usually required within a traditional company car scheme. Rather, they make a personal contribution to the vehicle via payments deducted directly from their salary each month. As part of this payment, insurance, accident and breakdown cover and servicing of the vehicle are included.
Because employees legally own the vehicle, your company may benefit from the tax-efficient nature of business mileage reimbursement on privately owned vehicles, as well as making company car tax and NIC savings. For companies who have a large field-based workforce with high business mileage, the savings under an ECO scheme can be sizeable.
This is how it works, anything else suggested is incorrect.THIS IS FACT
What part of ECO scheme did you not understand?
.... Oh, the last word.
HOW IT WORKS
ECO schemes entail employers offering employees a monthly salary allowance to spend on a car of their choice. This allowance is generally based on the employee's grade, tax bracket and annual business mileage.
Vehicles within an ECO scheme are sold directly to employees through a credit sale agreement, with contract terms and mileage limits to suit them. Employees do not pay BIK tax, as is usually required within a traditional company car scheme. Rather, they make a personal contribution to the vehicle via payments deducted directly from their salary each month. As part of this payment, insurance, accident and breakdown cover and servicing of the vehicle are included.
Because employees legally own the vehicle, your company may benefit from the tax-efficient nature of business mileage reimbursement on privately owned vehicles, as well as making company car tax and NIC savings. For companies who have a large field-based workforce with high business mileage, the savings under an ECO scheme can be sizeable.
Just to add though, the employee pays a BIK on the actual interest rate versus the HMRC official rate. This is usually a small amount which employees build into their tax coding...a letter has to go to HMRC each time a car is changed.
Also, the manufacturer avoids Class 1B NI under this methods which they wouldn't if going the traditional company car route.
For the employee these schemes are great for having low cost thirsty cars....petrol Skoda VRS were my fav.
Sorry I'm late, and haven't read the whole thread, but I was a LL5 at Ford until 5 years ago and I can explain exactly how it works (and how it is HMRC compliant).
Firstly, Ford sell (or did) the car to Ford Credit, who lease the car to the employee for a set lease price (which is waaaaay below market price). The lease price is calculated based on the expected RV of the car after 9 months with low mileage, usually through the Ford Direct scheme (as these are always high-spec models). In other words, it is designed so that Ford Credit make a profit on the car based on the lease payments received and the expected remarketed value. They have to demonstrate the overall scheme makes a profit for it to be above board.
The low level managers (were called LL6) pay a lease price, but the next level up (called LL5) got an payment back called Car Purchase Allowance Adjustment (CPAA) which was equivalent to something like 50% of the lease cost, although this was a taxable salary element. The more senior you were, the more money you got back. This could be why the OPs friend got such low rates, but I remember my cars were never more than £140 pm or so.
Also bear in mind the lease price included insurance, as Ford "self insure" the car itself and just paid a premium for TP claims to Zurich .
Things may have changed now, but the dynamic as above used to be manufacturer sells to finance arm, who lease the car to the employee, and make their money back on resale. The employee never paid tax, the car was not registered to them at all, and the payment was taken directly from their net salary.
If you ever see a Essex-plated Ford driving around with "Ford Motor Company Ltd." on the number plate, odds on it is a management car (or pool car).
Firstly, Ford sell (or did) the car to Ford Credit, who lease the car to the employee for a set lease price (which is waaaaay below market price). The lease price is calculated based on the expected RV of the car after 9 months with low mileage, usually through the Ford Direct scheme (as these are always high-spec models). In other words, it is designed so that Ford Credit make a profit on the car based on the lease payments received and the expected remarketed value. They have to demonstrate the overall scheme makes a profit for it to be above board.
The low level managers (were called LL6) pay a lease price, but the next level up (called LL5) got an payment back called Car Purchase Allowance Adjustment (CPAA) which was equivalent to something like 50% of the lease cost, although this was a taxable salary element. The more senior you were, the more money you got back. This could be why the OPs friend got such low rates, but I remember my cars were never more than £140 pm or so.
Also bear in mind the lease price included insurance, as Ford "self insure" the car itself and just paid a premium for TP claims to Zurich .
Things may have changed now, but the dynamic as above used to be manufacturer sells to finance arm, who lease the car to the employee, and make their money back on resale. The employee never paid tax, the car was not registered to them at all, and the payment was taken directly from their net salary.
If you ever see a Essex-plated Ford driving around with "Ford Motor Company Ltd." on the number plate, odds on it is a management car (or pool car).
Edited by Jefferson Steelflex on Wednesday 26th October 13:32
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