Salary Sacrifice for Electric Cars

Does a Salary Sacrifice scheme have to be open to all employees?

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Hi Everyone,

I'm looking for some clarify and I have received conflicting information. 

I'm currently looking at obtaining fully electric cars under salary sacrifice for a select number of staff.

My question is, does a Salary Sacrifice option need to be available to ALL staff within the business or can I ringfence several senior staff for example.

Thanks in advance.

SM 

Replies (10)

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By Tax Dragon
20th Jan 2022 07:58

Is this an employment law question? Your choice of tag is exceptionally unhelpful.

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By Yeadonian
20th Jan 2022 09:13

I don't believe it is usually possible to offer this to all staff, given that you are not allowed to take anybody below minimum wage with a salary sacrifice.

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By Hugo Fair
20th Jan 2022 15:53

Your first question should be whether you can offer Sal Sac (as a tax/nic saving device) for electric cars? To which the answer is I'm not sure ... the range of things covered by this kind of tax-efficient sal sac was severely restricted from 6 April 2017 onwards:
https://www.gov.uk/government/publications/income-tax-limitation-of-sala...

The point being that I've no idea if a fully electric car falls within the category of "ULEVs emitting 75g CO2/km or less - section 139" as per Part 3 of ITEPA ... maybe someone else here knows?

If it doesn't then even if provision is described as Sal Sac, HMRC will regard it as a BiK and expect you to "fix the taxable value of such a BiK at the higher of the amount of cash forgone or the amount calculated under the existing BiK rules."

If everything's hunky-dory, then your original question comes into play - and the answer is ... No it doesn't need to be available to ALL staff within the business (but does have to be properly implemented as a documented reduction in contractual salary, not just set up in payroll as a deduction).
[Start at https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye and follow all the links therein as appropriate to your scenario].

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Replying to Hugo Fair:
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By the_drookit_dug
20th Jan 2022 16:01

Electric cars are not caught by the OpRA rules as far as I'm aware. In fact, I think the provision of electric company cars is becoming quite popular for that reason (and the low BIK rate of course).

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Replying to Hugo Fair:
A Putey FACA
By Arthur Putey
20th Jan 2022 17:26

Does the low BIK on an EV work against the case for providing them under a salary sacrifice scheme, if you get my drift?

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Replying to Arthur Putey:
A Putey FACA
By Arthur Putey
20th Jan 2022 17:38

Actually I might have answered my own question, in that it is the other way round, I sacrifice £300pm to get the EV at what it costs the company to lease, but I am only taxed on the BIK of say £30 a month at current rates?

That's assuming the EV being a zero emission vehicle falls into the exemption.

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Replying to Arthur Putey:
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By Summit-M
20th Jan 2022 18:00

Some businesses are also passing in the corporate tax saving to employees for a further saving. Worth asking the question?

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Replying to Hugo Fair:
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By Summit-M
20th Jan 2022 17:57

Hi Hugo,

Yes EV fall within the scope and can be S/S'd. HMRC are really driving this at the moment. There will be a BIK tax @2% from the 2022/23 tax year but the employee is benefiting from reduced tax and NI, and the business reduced ENI, CTX and 50% of the input VAT can be claimed back.

Salary Sacrifice does not have to be offered to all employees which answers my original question.

Thanks,
SM

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Replying to Summit-M:
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By Tax Dragon
20th Jan 2022 18:03

Summit-M wrote:

HMRC are really driving this at the moment.

Badum tish.

Sounds like you've answered your own question - so thank you for posting back to say - not everyone does, which can be frustrating.

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Replying to Hugo Fair:
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By Summit-M
20th Jan 2022 17:57

Hi Hugo,

Yes EV fall within the scope and can be S/S'd. HMRC are really driving this at the moment. There will be a BIK tax @2% from the 2022/23 tax year but the employee is benefiting from reduced tax and NI, and the business reduced ENI, CTX and 50% of the input VAT can be claimed back.

Salary Sacrifice does not have to be offered to all employees which answers my original question.

Thanks,
SM

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