Salary sacrifice car scheme

Salary sacrifice car scheme

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There's a new scheme that is being promoted by a variety of consultants and fleet management companies to generate savings for employers by replacing mileage allowances with a low emission company car. The employee takes a salary sacrifice that is geared to place the employee in a cash netural position compared with running the car privately, and the employer pays fuel for business miles only. By using low emission cars, the BIK is very low, so the tax and Class 1A on the BIK is much lower than the tax and Class 1 saving on the salary sacrifice.

This almost seems to good to be true. I imagine that if this was adopted widely, that HMRC would try and close this gap. Does anyone think that the scheme falls foul of current rules? The differences with other salary sacrifices appear to be that the amounts are large (£2-3k) and that the sacrifice will vary from employee to employee depending on current levels of business mileage and choice of car.
Neil Eglintine

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By Dave Paveley
10th May 2008 07:15

I agree..

This is exactly the point of giving tax breaks for low emission cars - to encourage employers/employees to choose them over gas guzzlers.

No doubt Gordon, sorry.. Alistair, will move the goalposts if they notice that their politically motivated decisions actually result in people using them!

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By PeterM62
14th May 2008 08:54

Green Car Scheme
The scheme meets HMRC salary sacrifice criteria so should not be challenged. This is a way for both employers and employees to assist in the reduction of CO2 emissions and, although has tax and NI savings as a major driver, should be welcomed by Government.

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By neileg
14th May 2008 11:33

Thank you
Thanks for your observations, gentlemen. It's always useful to have some back up!

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By AnonymousUser
09th May 2008 15:43

Don't see any problem in theory
100% CAs, BIK at 10% of list price, and no increase to AMAPs have transformed the equation for company cars.
It's not unusual for new starters to have the choice between company car and (taxable) "car allowance". Provided the salary sacrifice is carefully implemented it should work.
If HMRC / Treasury don't like the consequences, it won't be the first time their own rules have backfired.

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