ev salary sacrifice

looking for accounting treatment guidance on Electric vehicle scheme

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currently we have 3/4 year car leases in relation to salary sacrifice arangements with employees, these are not recorded on the BS, is this correct? currently once the invoice from supplier comes in its booked to an car lease PL code this is offset by a credit from the employee salary therefore the lease account sits with 0 balance. is this correct? if it's not can you please explain how I should be accounting for this. 

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By Bobbo
26th Apr 2024 09:00

Whether the cars are recorded on the balance sheet is a matter for the precise lease arrangement (e.g. finance lease or operating lease) and accounting standard followed (FRS 102 / FRS 105 / IFRS). As such no one can comment on these without you providing detail.

What is this "credit from the employee salary?" Is the credit the amount of salary they have sacrificed? So you are still reporting the pre-sacrifice salary in wages?
Technically i'd say that as the employees have sacrificed the salary, the amount that should be being shown in wages is the lower (post-sacrifice) salary so there is no credit, then show the full vehicle lease costs as an expense.

Whether you group the vehicle lease costs as a component of 'staff costs' for reporting purposes as they represent the cost of benefits provided to employees rather than vehicles used for the business' own purposes is another matter.

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Replying to Bobbo:
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By FactChecker
26th Apr 2024 14:15

100% this -->
"What is this "credit from the employee salary?" Is the credit the amount of salary they have sacrificed? So you are still reporting the pre-sacrifice salary in wages?
Technically i'd say that as the employees have sacrificed the salary, the amount that should be being shown in wages is the lower (post-sacrifice) salary so there is no credit, then show the full vehicle lease costs as an expense."

OP: and I was having such a lovely day!
Salary Sacrifice is a Contractual Reduction in Salary (NOT a deduction from it).

This means the EE no longer has any 'right' to the old salary (where the value of anything else is related to salary) / the ER has to keep providing the benefit even if for some reason EE is on zero pay for a time / the sacrificed amount can't simply be varied if the lease costs change / and so on.
N.B: the reduced salary is what should be shown as gross pay on payslips and on anything EE uses when applying for a mortgage.

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