Company EV (Purch. funded with allowance & salary sacrifice)

[RichardD]

There is currently an offer of a company car at work, no cash alternative, modest budget.

Using this for an EV runabout, in terms of cost - benefit, it is a great offer.

However, I’d like to increase the budget to get something better than just a run-around class car.

EIM44060 states that for Low Emissions Vehicle purchases the benefit is (still) determined by the BIK.

A car would be purchased, not some lease agreement.

The complication as I see it would be if a car were sold, e.g., after five years, there should be pro-rata retained value in the car, so if it lost 50%, then some of the Salary sacrifice money/value would still exist.

It would be unfair IMHO to write off all SS monies contributed (this would effectively lower the company's depreciation hit). (It would then be more financially efficient to stick with the normal budget for a runabout and then fund another classic sports car myself! )

I acknowledge that such an arrangement may be just a ‘gentleman's agreement’ and not anything legally enforceable. (This isn’t a concern.)

If the ‘retained value’ were to be returned to an employee – as long as it goes through PAYE (P11D?) then there would be no benefit / tax avoidance... and all would be well in the eyes of HMRC?

Anyone with any knowledge / experience of similar? As far as I can tell the above should be fine, but, I’m not the company Financial Director (I’m the one wanting a nicer car) and I would really like better than ‘should’.

The MD is cool with the idea in theory, the FD is... rather cautious

[MustangGT]

I do not see how this can work with a purchased car, a lease would be relatively simple. If I have read your post correctly the company will be buying the car and you wish to add funds to the budget to get a better car?

I would not even consider this as a sensible option.

[RichardD]

MustangGT said:

I do not see how this can work with a purchased car, a lease would be relatively simple. If I have read your post correctly the company will be buying the car and you wish to add funds to the budget to get a better car?

I would not even consider this as a sensible option.

Thanks for your comments. The middle sentence is correct. Also, normal running costs would still be company funded.

Lease deals appear to be at least 50% more expensive than this (not so sensible) idea by comparing their costs to most likely depreciation, it would be better financially to have an EV run-around car (within budget) and fund an extra sports car privately - rather than lease!

The nearest scenario out there on the www so far discovered is the below (which did not get any useful response from the powers that be).

https://community.hmrc.gov.uk/customerforums/expen...

Ultimate legal enforceability of ownership claims (if that is the lack of sensible implied?), isn't considered an issue in terms of trust between involved parties.

The only question was really with regards to money transfers and HMRC.
To quote HMRC - "The optional remuneration arrangement rules do not apply to cars with CO2 emissions of 75 grams per kilometre (km) or less" - are they not saying it is OK to have an effective pay cut to fund an EV(?) They definitely now imply that doing the same for a normal vehicle (>75g) isn't allowed and cutting pay will not cut PAYE.

It is also possible to make an initial 'capital contribution' towards the cost of a company car, which reduces the effective vehicle value HMRC use for BIK calculations.

[MustangGT]

RichardD said:

https://community.hmrc.gov.uk/customerforums/expen...

Ultimate legal enforceability of ownership claims (if that is the lack of sensible implied?), isn't considered an issue in terms of trust between involved parties.

The only question was really with regards to money transfers and HMRC.
To quote HMRC - "The optional remuneration arrangement rules do not apply to cars with CO2 emissions of 75 grams per kilometre (km) or less" - are they not saying it is OK to have an effective pay cut to fund an EV(?) They definitely now imply that doing the same for a normal vehicle (>75g) isn't allowed and cutting pay will not cut PAYE.

It is also possible to make an initial 'capital contribution' towards the cost of a company car, which reduces the effective vehicle value HMRC use for BIK calculations.

As I understand it the reason for not allowing the remuneration arrangement rules for low emission cars are likely to be because the tax payable is so small anyway it would likely be reduced to zero.

I have had a pension scheme funded by salary sacrifice, This helps with tax and NI for the individual and company and has limited tax effect to HMRC because pension contributions are allowable against tax. I have not come across salary sacrifice schemes for anything other than tax allowable items e.g. pensions, cycle to work, childcare etc.

With lease deals the amount you paid monthly would be offset against the tax liability for having the car. I believe the capital contribution works similarly in that if the car was £30k and you contributed £5k then your tax liability was then based on a value of £25k instead.