Setup sal sacrifice 4 electric vehicles in ledgers

Liabilities and contingent liabilities could arise from electric vehicle scheme via salary sacrifice

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Hello all,

I am after some practical help with the ledger accounting for a scheme. We are in the stage of exploring the market, and some first-hand and theoretical advice would be very welcome.

The organisation is planning to not enter into a direct contract with the electric vehicle scheme; the employee will. The scheme would be an operating lease, with the option to buy at the end should the employee choose it. All maintenance is with the employee.

The organisation probably will need to pay a deposit to the scheme, from which there might be deductions if lease payments are not continuous. 

1 - Insurance contracts - drafted for the organisation for the scheme - could there be any liabilities or contingent liabilities arising from them?

2 - Deposit for scheme - Long-term asset and bank?

3 - Default on payments and deposit draw - contingent liability recognised?

I have no further details as we are in this project's first stage. My apologies if this is not enough information and if you have anything else to suggest that might happen in these contracts affecting the accounting behind it, please let me know.

Your input is very much appreciated, thank you




Replies (9)

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By David Ex
08th Feb 2024 14:02

That’s not what this forum is for. You need to speak to your accountant.

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Replying to David Ex:
By FactChecker
08th Feb 2024 14:40

... who may wish to know how OP jumps from "The organisation is planning to not enter into a direct contract with the electric vehicle scheme; the employee will" - to talk of contingent liabilities for the employer (sorry "organisation")?

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Replying to FactChecker:
By David Ex
08th Feb 2024 15:15

FactChecker wrote:

... who may wish to know how OP jumps from "The organisation is planning to not enter into a direct contract with the electric vehicle scheme; the employee will" - to talk of contingent liabilities for the employer (sorry "organisation")?

Yes, I did think a salary sacrifice arrangement where the employee acquires their own car was novel.

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By kestrepo
08th Feb 2024 14:43

My understanding of your question is that you are asking about a Company Vehicle that is not actually going to be a Company Vehicle...... but the Company is going to pay for it. Sounds complicated - do let us know how it all turns out! A Salary Sacrifice Scheme is usually between an Employer and their Employee. The Contract for the Vehicle is usually between the Employer and a Lease company. I would offer caution in trying to circumnavigate tax legislation outside of this approach. There are lots of companies out there that do offer a Salary Sacrifice Scheme for Electric Vehicles but they will charge fees or commissions. My own interpretation of your original post is that you might be better off in offering a Taxable Car Allowance (via PAYE) to the Employee which works out to a Net value similar to the amount of the the monthly lease repayment - this is a lot less paperwork (especially if an Employee leaves or is made Redundant) but perhaps this is not as tax efficient as you had originally hoped for?

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By paul.benny
08th Feb 2024 15:33

I note you're just asking about the accounting - some of my learned colleagues here have possibly overlooked that. But they are right to do so because this looks like a needlessly complex scheme mostly designed around trying to maximise tax benefits

Right now, companies get generous tax allowances on buying EV and employees get lower BIK than on combustion-engined vehicles. That combination is generally the lowest after-tax cost for the parties. But there is a budget in less than a month, which may change that.

I really don't understand the scheme proposed - it sounds like employer will facilitate employee purchase/lease and will in some way underwrite the finance liability on employees. That's fraught with risk.

You refer to the "organisation" - are you not a regular company?

A few other observations about the scheme described
- personally-owned cars will probably not be covered under company insurance
- if employee funds maintenance, cost is funded from after-tax income and company cannot recover the VAT
- importantly, employer will need to ensure that if they are ever to be used on company business, vehicles are properly maintained and ensured. An incident could lead to unwelcome consequences for all.

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Replying to paul.benny:
By JB101
08th Feb 2024 16:45

"organisation" - is this another type of SPV!

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By Dougscott
08th Feb 2024 22:43

You may have good legal advice but I dont know how you can operate a salary sacrifice schem if you do not own the asset.

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By Tax Dragon
09th Feb 2024 06:14

"We are in the stage of exploring the market"

Are you finding one? Post Apollo Fuels, who used to offer something similar-sounding (but without using the words 'salary sacrifice', which, like previous respondents, I don't understand in this context), and the 2016(?) rule changes, I doubt there is much on the demand side for such schemes.

And tbh I wonder what offerings there are on the supply side of such arrangements.

But, from your first-hand experience, is there a market?

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By Tax Dragon
09th Feb 2024 06:25

And as Paul notes, you are asking about the bookkeeping. Is it fair to say that others have been involved in designing the scheme, have maybe explained it to you but may have done so badly, and you are trying to piece it together?

If so, I'd say you are entirely entitled to, and indeed should, ask your employer to obtain guidance from the advisors that helped design the scheme. I don't see how you can possibly get it right otherwise.

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