Company Cars Top Tips & Trends

Transcription

1 Company Cars Top Tips & Trends E-Reward Annual Conference 24 November 2011 Elspeth Jones Innecto Mike Moore - Deloitte Elspeth Jones

2 Going Green & Staying Safe Top Tips & Trends Agenda Going green & staying safe policy top tips Free fuel is there a benefit? Mile after mile tax efficient mileage payments Flexing fleet will salary sacrifice work for your business? Astra Zeneca an update 14/11/11

3 Going Green & Staying Safe Is it Green to provide cars? Audi 1 SE 1.6TDI Manual Car scale charge is 14,480 x 10% = 1, tax liability for a basic rate tax payer Less than 5.70 per week for fully expensed car Source 14/11/11

4 Going Green & Staying Safe How to protect your people & your business Range of safety measures Key to identify risks and dangerous behaviours If running checks, remember data protection rules Licence Insurance Mobile Phone Usage Driver Testing Driver Training 14/11/11

5 Going Green & Staying Safe Green v. Grey Employee Cost Cutting Solutions Time lost by employees without breakdown cover Include breakdown cover in flex or voluntary benefits Defaulting on car loans Over-claiming business mileage Employees driving older private vehicles No business insurance Consider moving employees into company cars Regularly review claims to prevent HMRC exposure Introduce voluntary car scheme Consider business wide insurance policy to cover gaps 14/11/11

6 Going Green & Staying Safe Green v. Grey Health & Safety Check validity of driving licence Ensure cars maintained & serviced regularly with MOT, if applicable Require private drivers to report all accidents Ensure vehicles are fit for purpose Implement vehicle age & CO 2 cap Consider cap on number miles travelled annually Risk assessment for all drivers Eye checks for all drivers & make notification of medical conditions compulsory Abuse of mobile phone policy Solutions Annual licence checks (quarterly if points) Car park checks on vehicles Promote alternative transport if employees driving too many miles Use risk assessment to identify if further driver training required Allow drivers access to free eye tests Develop safety culture reminders on key issues such as driving in winter, regular breaks, planning journeys, checking tyre tread and pressure etc. Spot checks on mobile phone usage 14/11/11

7 Going Green & Staying Safe Reward Strategy Considerations Get close to manufacturers to secure best discounts Extend the life of cars.or dispose of them more quickly Align the business plan with fleet demands Green the fleet to reduce NIC of car allowance cheaper than of salary Benchmark car allowances regularly as cost of motoring decreases (with the exception of fuel prices) 14/11/11

8 Going Green & Staying Safe Reward Strategy Considerations Optimise AMAP rates & cash allowances Trading up / Trading down flexibility at a cost Introduce a voluntary car plan or consider salary sacrifice Alternative transport Dust down season ticket loans Get employees on their bikes Review taxi expenditure Catch the bus Free car parking for car sharers Drive the chauffeurs out of town 14/11/11

9 Going Green & Staying Safe Private Fuel Price of fuel continues to fluctuate Vehicle CO 2 reducing Is there still a benefit? 14/11/11

10 Going Green & Staying Safe Example (2011/12) VEHICLE VALUE OF FUEL Vauxhall Astra (5 Door Hatchback 2.0CDTi 16v) Combined fuel consumption 47.1 mpg CO 2 emissions 158g/km Calculated as % of fixed sum - 18,800 Tax % same used to calculate car benefit Fuel scale charge 18,800 x 24% = 4,512 TAX LIABILITY 902 basic rate tax payer 1,804 higher rate tax payer HOW MUCH FUEL 142 gallons diesel basic rate tax payer 284 gallons diesel higher rate tax payer National average diesel price 1.40 / litre BREAK-EVEN MILEAGE 14/11/ x 47.1 = 6688 private miles - basic rate tax payer 13,376 private miles - higher rate tax payer Sources

11 Going Green & Staying Safe Next Steps REVIEW PROVISION OF FUEL & PROFILE OF DRIVERS CALCULATE COST OF BENEFIT TO EMPLOYEE VERSUS COST OF FUEL TO COMPANY IMPLEMENT CHANGE NOW DON T WAIT UNTIL 6 APRIL WIN-WIN FOR EMPLOYEES AND BUSINESS 14/11/11 PLANNING TOP TIP RETAIL VOUCHERS

12 Elspeth Jones is a reward professional with both consulting and in-house management experience. After nearly a decade with Deloitte advising clients on tax efficient remuneration and compliance, she moved to Marsh as Head of Reward in 2005 where she was responsible for compensation and benefits, HR information systems and payroll. She led the implementation of flexible benefits for 5,000 colleagues and managed one of the UK s first DB pension scheme transitions to the career average basis. For Innecto, Elspeth has worked with a range of clients, including Local Partnerships and Charles Wells, on all aspects of reward, specialising in benefits strategy, cost reduction and fleet management. Elspeth has a degree in law, qualified in taxation then completed a Masters in Human Resources and is a Chartered Member of the CIPD. She is an experienced presenter and author; publications and events include Payroll Manager Review, Fleet News, Chartered Institute of Tax Forum, Tolley's Company Car Conference and E-Reward Annual Conference. You can contact Elspeth at elspeth@innectogroup.co.uk or on /11/11 This presentation has been written in general terms and therefore cannot be relied on to cover specific situations; application of the concepts outlined will depend upon the particular circumstances involved and it is recommended that you obtain professional advice before acting or refraining from acting on any of the contents of this presentation. Elspeth Jones would be pleased to advise individuals on how to apply the concepts outlined in this presentation to their specific circumstances. Elspeth Jones accepts no duty of care or liability for any loss arising to any person acting or refraining from action as a result of any material in this presentation. Elspeth Jones All rights reserved.

13 SMART Miles & FLEX Cars. Choice - Cost - Environment Mike Moore 24 November Deloitte LLP. Private and confidential

14 SMART Miles Tax Efficient Mileage Payments Opportunity to generate employer and employee savings on cash allowances Employers can reimburse business mileage up to set limits for private car users free of tax and NI. Why not increase mileage payments and reduce cash allowances by the same amount? Under SMART Miles cash allowances are restructured to maximise these rates generating tax efficiencies for both employer and employee. Technology is at the heart of SMART Miles, delivering an administratively simple and compliant solution Deloitte LLP. Private and confidential

15 SMART Miles The benefits There are a number of benefits for employer and employees that will be delivered as a result of implementing SMART Miles. Cost saving opportunity(employer) Opportunity for the employer to deliver ongoing cost savings, helping to offset increases in NI rates. Increase take home pay (employee) Overnight increase to employee take home pay. Reducing the admin burden on employees Removes requirement for employees to claim tax relief for business mileage travelled via their Self Assessment return. Overall fleet policy enhancement Can be implemented in line with a wider company car fleet review to enable a best in class car and cash fleet policy Deloitte LLP. Private and confidential

16 SMART Miles Employer savings matrix The level of NIC savings depends on the business mileage travelled and the eligible employee population. Annual Employer Saving (1) Number of employees Average business mileage (2) ,000 2, ,139 2,846 5,693 11,385 28,463 56, ,850 5, ,277 5,693 11,385 22,770 56, , ,700 7, ,416 8,539 17,078 34,155 85, , ,550 10, ,554 11,385 22,770 45, , , ,400 12, ,693 14,231 28,463 56, , , ,250 15, ,831 17,078 34,155 68, , , ,100 17, ,970 19,924 39,848 79, , , ,950 An 20,000 employer with employees 9,108 travelling 10,000 22,770 miles per 45,540 annum could 91,080 generate employer 227,700 NIC savings 455,400 of 113, ,800 (1) 2011/12 NI rate used. (2) Business mileage reimbursed at 12p per mile Deloitte LLP. Private and confidential

17 FLEX Cars Overview Employee sacrifices salary, which covers the full cost to the employer after tax Employer provides new fully serviced, insured and maintained low CO 2 vehicle Employee and potential employer savings through tax, NI and purchasing power Benefits Remuneration Increased benefits choice at no extra cost Significant savings for employees Recruitment Overall enhancement to the remuneration package Employees bought in to the scheme and motivated to stay CSR Measurable impact on carbon footprint Increasing demand from candidates for green employer initiatives Corporate Health & Safety Can manage Health & Safety issues from grey fleet Deloitte LLP. Private and confidential

18 FLEX Cars Latest position Where is the market at now? Update Significant growth in number of businesses implementing Impressive take up rate for an optional benefit Benefit In Kind regime to be based on emissions for the foreseeable future Companies looking to use it as a framework for car allowance takers Myths Must be available to all employees Difficult to implement high administration HMRC are looking to legislate against salary sacrifice It doesn t work if the company can t recover VAT Considerations Employee profile, early contract terminations, unpaid leavers and end of lease charges Contract term and mileage, with motor insurance Salary deductions, payroll and processes Relationship with other benefits Employee facing car order technology Deloitte LLP. Private and confidential

19 FLEX Cars Why whole life cost? Deloitte LLP. Private and confidential

20 Policy decisions FLEX Cars Practical considerations Design considerations Employee populations Which cars and how many Manufacturer discounts Length of contract term and mileage Insurance Administration Leavers Cost neutral/savings Cost recharges Internal processes and systems Internal accounting Regulatory considerations National minimum wage Unpaid leave (including maternity) Work, statutory and state benefits Consumer Credit Act Pensions Car provider contract considerations Early terminations End of lease charges Other miscellaneous charges Excess mileage Open book/profit sharing Contract extensions/rewrites Scheme that fits your business goals and requirements Deloitte LLP. Private and confidential

21 FLEX Cars Simple financial illustrations Employees Higher rate taxpayers Car Description P11D ( ) CO 2 ( g/km) Company Car Cost ( ) Private Car Cost ( ) Saving ( ) Net Cost ( /mth) Employer Contingency ( /2 yrs) Peugeot 107 Hatch 3 Door 1.0 Urban Lite 8, ,211 7,191 2,980 (41%) Audi A1 3 Door Hatch 1.6 TDi SE 14, ,846 8,183 2,337 (29%) BMW 3 Series E90 4 Door Saloon 318d 2.0 ES 24, ,430 14,409 4,979 (35%) Volkswagen Polo 3 Door Hatch 1.2 S 70 10, ,134 7,954 2,820 (36%) Alfa Romeo Door Saloon 1.9 JTDM 8V Turismo Ecomotive 20, ,706 14,061 3,355 (24%) BMW 5 Series F10 4 Door Saloon 520d 2.0 SE 27, ,264 15,096 2,832 (19%) Nissan Qashqai 5 Door Hatch 2.0dCi Visia 18, ,294 12,080 2,785 (23%) Audi A6 4 Door Saloon 3.0 TFSI Quattro SE Tiptronic 36, ,338 25, (3%) 1, Notes Figures over 24 month term Quotations are based on standard commercial discounts 600 per annum insurance cost Deloitte LLP. Private and confidential

22 Astra Zeneca Case and VAT From 28 July 2011 employers need to account for output VAT on some salary sacrifice arrangements Grandfathering of old rules for arrangements entered into before 28 July 2011, that extend beyond 31 December A refresh of salary sacrifice arrangements triggers new rules Generally no impact on car salary sacrifice arrangements Deloitte LLP. Private and confidential

23 Mike is a Director in Deloitte s tax practice based in London. Mike leads Deloitte s Car Consultancy Team and advises on a wide range of clients including employers, on the operation and cost management of their car fleets in the UK and Europe. This advice encompasses policy design, project management, implementation support and procurement Mike has assisted a number of fleet management clients in developing and enhancing their service offerings. He has been strategic in developing Deloitte s FLEX Cars software which has won numerous awards and is used by many fleet management companies. Mike speaks regularly at client seminars and external conferences on company car fleets. Mike also contributes regularly to the fleet industry press. Contact mlmoore@deloitte.co.uk Deloitte LLP. Private and confidential

24 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ( DTTL ), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP is the United Kingdom member firm of DTTL. This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication Deloitte LLP. All rights reserved. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) Fax: +44 (0) Member of Deloitte Touche Tohmatsu Limited 2011 Deloitte LLP. Private and confidential