Ford Management Role Cars and HMRC

[Extra 300 Driver]

I have a friend who is a LL5 in Ford, so a lower level manager, but one of the perks of his job is he gets 2 new cars, every 3 months or so for him and his partner, Ford obviously.

The cars take 3 months to be delivered, so as he takes delivery of a new one, he orders his next. Currently he had a Mondeo and C Max, both top of the range, all extras possible and he pays £290 for BOTH! Yes, £290!

So, if I went to a Ford dealer and wanted a Mondeo with all the bells and whistles it would cost about £300 and C Max about £280, before all the options. So lets say £650 all in, but this will exclude road tax and maintenance, which would be minimal over 3 months anyway (and the £650 is over 3 years and 10,000mls p.a). So, £650 v £290?

If I wanted a Mondeo as a Company car, with options it would cost me nearly £300 a month in TAX, so how is the Ford MR car, not a BIK? I fail to understand how he gets away with not paying any company car tax, but rents his cars at a massive discount each month. It’s not available to most Ford employees, nor the general public, so it’s a benefit of his employment. He doesn’t need a car to do his work, nor his wife, who doesn’t work for Ford.

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 (which I would never buy, he never washes his or looks after them at all!!!!)

[Extra 300 Driver]

giger said:

Is it salary sacrifice? So a private arrangement with his work place that he gets to pay for the cars pre-tax, and therefore not a mandatory 'perk of the job'. Can Ford then depreciate the car and write this off against their tax liability? (not sure about that last bit).

I understand that if you are entitled to the scheme then you are 'encouraged' to take it (you have to)

[Extra 300 Driver]

giger said:

It could still be salary sacrifice - Ford will be lowering the annual pay of the employee which will in turn reduce Ford's NI contributions.

I suppose then, that if you do not take the cars, you get more a month in your salary? I know this isn't the case.

[Extra 300 Driver]

PurpleTurtle said:

Lots of large manufacturers do this or something similar.

If it is anyhting like the non-Ford scheme that I am familiar with , the key thing is that it is Employee Car Ownership: the cars are registered to your friend, not to the manufacturer.

Your friend nominally pays for the cars under a preferentially low-rate loan provided by Ford'd finance co.

The BIK is the subsidy on the loan, I believe. Something along those lines anyway.

Theyre registered to Ford Motor Company, not the individual. Believe me I have looked at this from most angles and I cant figure it out. As a business owner I would love to know how they do it. They insurance is also provided by Ford.

[Extra 300 Driver]

ruggedscotty said:

Its a perk.....

Ford make cars, they know the market and the way it works. Heavily optioned ? brings the resale price up. very short term use before its disposed to market - remember they have garages to sell them through so they save. its almost a new car for all intensive purposes.

Ford insurance ? they have their own. this makes it very very simple to complete.

Anyways see nothing wrong with it and also don't see why he shouldn't benefit through working for them.

So if I take a benefit from my business should I not pay tax?

[Extra 300 Driver]

ruggedscotty said:

not if it is classed as work related ? cars are being given to employee to make an assessment on through normal day to day driving etc. employee gives report back when hands car back. customer clinic style.

They will have it all covered. duration of use ? if it is a short term use could it not be deemed to not be a perk as such ?

I did hear that if they have an accident they get all excited and have the technical team all over it. nowt like a real life accident to see how the car performs.

I don't get it, he gets a new car every 3 months, of his choice, even colour. He is not being told he has to use a particular car. So that throws that argument out the window. Also, what about his wife? And this is normal for all managers at Ford, he's hot a special case.

[Extra 300 Driver]

RobXjcoupe said:

Different jobs have different perks. Ford give this grade that entitlement, lesser grades have a lesser entitlement. You don't work for Ford so of course you won't get those prices. I can't see why Ford should let you have the same entitlement if you don't work for them?
It was mentioned about getting cars in the market. That is correct. A new model is always pushed. When the first Kuga came out Ford did an employee offer of £900 for 13 months to get the cars on the road and seen by the public. They could be bought after or just given back. I gave mine back after 11 months so I didn't have to service it.

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?

[Extra 300 Driver]

markoc said:

Ford make cars, their managers get a good car benefit. Go figure.

Yes they do, but I am interested in HOW they get it. How do they not have to pay TAX on it?

[Extra 300 Driver]

alock said:

Is staff discount subjected to BIK tax?

e.g.
£20k car depreciates by £2k over 3 months. Normal punter would need to cover £2k depreciation and interest on £18k.
Employees get 10% staff discount on new purchase. Employee therefore only needs to cover interest on £18k.

ok ok, making more sense now

[Extra 300 Driver]

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.

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]

schmunk said:

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.

Dont joke, we cant provide any benefits without being taxed

[Extra 300 Driver]

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.