Lease Car Scheme. Drivers Guide

Transcription

1 NHS Fleet Lease Car Scheme Drivers Guide Scheme Administrator: Knowles Associates TFM Ltd Red Lion House, The Green Great Bentley Colchester Essex CO7 8QG Telephone: Fax: NTW Contact: Joe Milne, Head of Facilities Telephone: Ian Ross, Service Manager (General Services) Telephone: Date of Issue: June 2011 NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 1

2 Introduction This FAQ has been produced to provide basic information about the new scheme. We have tried to simplify the explanation and therefore the answers provided should not be interpreted as conditions of the scheme. If you wish to proceed with the scheme you will be sent a conditions of use booklet that will give a more detailed explanation of the scheme. If, after reading this booklet, you would like further information or clarification, please do not hesitate to contact the lease scheme administrator. What is the lease car scheme? If you need to use a car for official business and you meet the criteria set out below, the Trust will provide you with an identical car in this scheme as a lease car. You will then have the option to make a payment to the Trust to use the car for your own private use. If you choose the private use option you can select any car you wish provided that it is suitable for the work that you do. Who can join the scheme? The purpose of the scheme is to provide transport to employees who are required to be mobile and where it is in the interest of the Trust to do so. In this respect a car may be offered to all new and existing employees who are required to travel on Trust business. How much will it cost? In broad terms you will pay for the private use of the car and the employer will pay for the business use. The employer will pay an allowance based on your annual business mileage. The cost of the car that you choose including insurance and maintenance etc. will be calculated, then the employer s allowance will be deducted from the total and you will pay the difference. Therefore if you choose a small economic car you will pay less. Depending upon your business mileage and your choice of car it is possible that you will pay very little for the car. Will I get any fuel reimbursement for business use? Fuel reimbursement will be included within the allowance your Trust contributes towards the lease vehicle; you will not receive any additional payment through the expenses system. The rate will be based on the Inland Revenue s advisory fuel rates or a local rate set by your Trust. The amount included within the allowance will be adjusted regularly to reflect your actual business mileage. More detail regarding fuel and the Trust allowance towards the cost of your car is discussed in the Further Information section at the end of this document. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 2

3 Is it cheaper than owning my own car? Generally yes. The NHS has negotiated high discounts with motor manufacturers and very competitive prices with the leading leasing companies. There are currently eight leasing companies who supply the NHS with lease cars. When we produce your quote we will obtain prices from each company and use the best price for your quote. Can I choose any make of car? Yes. One of the key benefits of the scheme is that you have a free choice of a car provided that is suitable for the work that you do. For example, if you carry a lot of equipment you may need a hatchback car or if you transport clients you may need five doors for easy access but generally there are few restrictions. Who is insured to drive the car? The car is fully covered by insurance and arranged on a fleet basis. Initially the driver and their partner will be included in the insurance. Additional drivers may be added but you will need to provide their full details on a proposal form. There may be an additional charge and a higher excess may apply to young and inexperienced drivers. All excess charges that apply must be paid by the employee directly to the garage who carries out the repairs on collection of the car from the garage. What is included in the contract? You can have the free choice of car, which will be fully insured, fully maintained and serviced. We will provide you with road fund licence and renewals plus accident and breakdown recovery services. All replacement parts such as tyres, batteries and exhausts are included in the rental (subject to being a result of fair wear and tear ). The leasing company will decide on what constitutes fair wear and tear in line with industry guidelines. Advice on this can be sought from the scheme administrator. In addition the scheme administrator will provide a full supporting service. For example if you have a problem with the car we will provide assistance via our help desk. If you have an accident we will deal with all the paper work and progress the repairs, we will also provide a courtesy car (subject to availability) and if conditions of the scheme are met whilst the accident repairs are completed. We will provide a mileage management service and advise you if your mileage needs revision and we will also advise you of your tax liability and report changes to the Inland Revenue. What is not covered? If you have an accident you will pay the policy excess as you would for your own car. If young or inexperienced drivers have an accident the excess will be higher. If you are not to blame and we can claim the excess from the third party, this will be refunded. Any damage that is not covered by the maintenance agreement can be recharged, this would normally be caused by misuse or neglect, for example not having the car serviced at the correct intervals. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 3

4 You may also be recharged for increases in road fund licence and increases in insurance premiums + VAT; these would be notified to you in advance of the changes. However, if these items reduce you will also receive an appropriate refund. Does the list price determine the lease rental? No. Leasing companies very rarely pay the list price for the car, they will always attract further discount. When you lease a car you are paying for five basic elements:- 1. The purchase of the vehicle (including discounts and cash-back offers) 2. The sale value of the vehicle at the end of the contract 3. The cost of maintenance, servicing, breakdown service, and road fund licence etc. 4. The interest on the finance element 5. The leasing company s overhead cost and profit When calculating the rental the leasing company will deduct the sale price from the purchase price and add interest, maintenance and overheads. The cost is then divided by the period of the contract. How long is the lease contract? The standard contract is for three years; however you can choose to have a car over four years. If you return the car early there may be a termination penalty. How many quotes can I have? We do not restrict the number of quotes because it is important that you select the right car for you. We would ask you not to request too many quotes initially, particularly if they are for a similar vehicle. It is much better to select a small range of cars so that you can, by a process of elimination, find the group of car that suits your requirements and budget. You can then request more detailed quotes for specific cars. You will find that this method will be quicker and far less confusing. Can you recommend a car if I tell you how much I can spend? Yes. If you give us a range say per month we will provide a selection of cars in this price range. What are the best deals at the moment? At different times some cars are better value than others but generally any car that is popular and holds its second hand value will offer the best price. Some examples are detailed below for guidance only and other cars may be cheaper on application. Small Toyota Aygo Peugeot 207 Honda Jazz VW Polo Medium Nissan Note Honda Civic VW Golf Toyota Auris NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 4

5 How long does it take to get a car? A lot depends on how quickly you decide which car you want and how quickly the forms can be returned. Forms and documentation will be turned around within the terms of the scheme s agreement. From our part we will take approximately five days to provide you with quotes, documentation and the order of the car. If the car is a factory order it can take between 6 to 10 weeks depending upon the model. If you currently have a scheme car we will start the process up to 4 5 months before your current car is due to be returned. What is business mileage? Business mileage can be defined as any journeys that you have to undertake as part of your work. This does not include normal home to work travel, this is private mileage. Sometimes you may travel directly to a client or a meeting without going to your work address. Part of this journey may be classed as business mileage if it is further than your normal home to office journey. When you calculate your business mileage, discuss this with your manager. If you are new to the post your manager may know the mileage travelled by the previous post holder. What is private mileage? Private mileage includes all journeys that you undertake for your own personal use. This includes travelling from your home to your normal place of work. Sometimes you may travel directly to a client or an appointment without going to work first. In this case part of the journey will be private and part will be business. HMRC Rules Fuel for Private Journeys in Lease Cars Home-to-Normal Workplace Mileage Claims HM Revenue & Customs has issued advice in line with their regulations that employees with a lease car incur a tax liability when claiming any home to normal workplace mileage. This includes journeys where an employee s terms of employment specifically permit such claims. For example, journeys made by staff subject to emergency or other call-out at night or at weekend, or for overtime purposes, Excess Travel where an employee has moved base as a result of organisational change and Senior Medical Staff who are required to make subsequent ravel from their normal base, are also included in this rule. Lease car users making such claims will incur a Car Fuel Benefit liability. This liability is a fixed annual amount payable by the employee and is calculated based upon the following:- 1. A fixed sum set annually by HMRC, multiplied by 2. A notional CO 2 emissions percentage related to the make and model of the lease car. e.g. fixed sum 18,800 (2011/12 actual) x CO 2 percentage, say, 20% = car fuel benefit = 3,760 NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 5

6 Car Fuel Benefit is applicable irrespective of the number of home-to-workplace miles claimed by a lease car user and your employer is required to include such benefits in the annual return of expenses made to HM Revenue & Customs. We recommend that claims for home to work base mileage incurred by lease car users should NOT be claimed due to the tax liability that will be incurred. This is not a change in your terms and conditions, but arises from a tightening of the application of tax law by HMRC. You need to be aware that if you make a claim for home-tonormal workplace mileage, or do so in subsequent years, the liability to pay Car Fuel Benefit will arise. We strongly advise that you consider this before making any claims for reimbursement of such mileage. Will a replacement vehicle be provided? You are not automatically entitled to a replacement car unless you have requested a relief car as part of your contract. However, we have in place a number of arrangements where you may be provided with a courtesy car subject to availability. It is important that you understand the difference between a relief vehicle and a courtesy car. A courtesy car is one that is provided free of charge by a garage or an accident repair body shop whilst they are repairing your vehicle. The car is provided as part of their service but the service is not guaranteed and is provided on a first come, first served basis. You must book a courtesy car and you may have to wait for a car to become available. We will provide a courtesy car in the event of an accident and if you provide adequate notice most garages will provide a courtesy car for normal repairs. You can also get a car for 24 hours if you breakdown, these are provided free. A relief vehicle is a car that is provided as part of your lease contract and is charged for on the basis of your requirement. For example you can choose a car to be immediately available or available after 24 to 48 hours. You can also choose a minimum specification or a like for like car. The cost of this will vary considerably and could range from 35 to 200 per annum. All courtesy cars have a manual gearbox; if you can only drive an automatic we strongly advise that you include a relief vehicle in your contract. Remember, if you want a guaranteed replacement car this must be included as an optional extra. What is car benefit tax? When a company car, in our case the lease car scheme, is made available for the private use of an employee a benefit in kind value is calculated in relation to the car. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 6

7 The HM Revenue & Customs use a formula to calculate the benefit for the private use of a company car that is based on the list price of the car, the amount of carbon dioxide the vehicle emits (CO 2 ) and also the private use contribution you make towards the car. The list price is set by the motor manufacturer, the CO 2 value is based on the carbon emissions of the car (in grams per kilometre) and your private use contribution is the amount you pay for the car before fuel reimbursement. The tax is collected through the PAYE system via an adjustment to your personal tax code. The HM Revenue & Customs will reduce your tax code by the value of the benefit. This simply means that if you pay tax at the standard rate the tax you pay will increase by 20% of the car benefit. When you apply for a quotation we will calculate the tax charge for you and we will inform HM Revenue & Customs to adjust your code if you take a car under the scheme. The HM Revenue & Customs publish a table of emission values that equate to a percentage figure, e.g. 120 grams = 10%. The table is reviewed each year in the budget. If you chose a low emission car you will pay a lower percentage of the list price and pay less tax, and if you chose a high emission car you will pay a higher percentage of the list price and more tax. Example car benefit calculation (as at 2010/11): CO 2 emission value 118 grams Percentage of list price 10% Car List Price 15, Full car benefit 1, (10% of 15,000.00) Less your contribution 1, for the private use of the car Final Benefit The tax you pay at standard rate We are not financial advisors so there are limits to the advice we can give, however if you require any further explanation we will be pleased to help. Special and Limited Edition Models and Dealership Promotions Often manufacturers and dealerships will offer new cars as Special or Limited Editions to promote vehicle sales. These vehicles are usually basic models with dealer fitted accessories and are often re-named for marketing purposes. Although these offers seem attractive, they are usually aimed solely at the retail market and would not attract the large discounts available to the NHS. We are able to provide quotations on Special or Limited Edition models but do not be surprised to find that the cost will be more expensive than a higher specification model, even if the advertised price is lower! The same applies when a dealer offers free of charge options to promote new vehicle sales. These promotions usually only relate to the retail market and would not apply to a fleet purchase. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 7

8 Will I pay car benefit tax at the higher or lower rate of tax? To assess if your car benefit tax should be at the higher rate (40%) or lower rate of tax (20%), the Inland Revenue will add the benefit in kind figure for your chosen lease car to your gross annual income and compare this against the total allowed threshold. If your gross annual income plus car benefit exceeds the threshold, then you will pay tax at the higher rate for the amount that exceeds the threshold. The total allowed threshold is made up of the sum of your personal tax free allowance and the higher rate threshold set by the Revenue each year. For the 2009/2010 financial year the higher rate threshold is 37, Example (A) Gross Annual Income - 30, Car Benefit - 2, Total Income - 32, Higher rate threshold (2009/2010) - 37, Personal allowance * - 5, Total Threshold - 42, The total income is less than the total threshold; therefore tax on the car benefit will all be at the lower rate (20%). Example (B) Gross Annual Income - 41, Car Benefit - 2, Total Income - 43, Higher rate threshold (2009/2010) - 37, Personal allowance * - 5, Total Threshold - 42, The total income is more than the threshold; therefore tax at the higher rate (40%) will apply for the difference, i.e only. The lower rate (20%) will apply for the remainder. * Please note that your personal allowance may vary depending on your individual circumstance, if you are unsure of your allowance please refer to the Inland Revenue for advice. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 8

9 End of contract During the contract period the original estimate of private and business miles will be monitored and where necessary the payment for the car adjusted, based on the actual business/private miles travelled. At the end of the contract a final review of all the business/private miles that have been taken during the contract period will be carried out.. A final calculation will be made to ensure the correct payment has been made for the period of the contract. Any monies due to the employee or from the employee to the trust will be either credited or deducted from the employee s salary. Individuals will be notified of this by the contractor prior to the credit/debit being actioned. In exceptional circumstances alternative options may be considered by the line manager and Head of Facilities. What is excess travel? Employees who are required to change their base of work as a result of organisational change (i.e. a merger of NHS employers or their acceptance of another post as an alternative to redundancy) may be reimbursed their extra daily mileage for a period of up to four years from the date of transfer (subject to length of service). Please note that entitlement to excess travel will cease within the four year period if the employee moves house. What are Advisory Fuel Rates (AFR)? FURTHER INFORMATION The Inland Revenue publishes AFR s in January and July each year. They are intended to reflect actual average fuel costs at the time they are set. Published AFR s do not mean that employers should pay higher rates than their own agreed policies require, it simply allows them to pay up to that rate without obtaining a dispensation. If the rate paid by employers for business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NICs liability. What happens if my employer pays more than the AFR? If an employer pays mileage rates that are higher than the advisory rates but is unable to demonstrate that the fuel cost per mile is indeed higher, any excess will be treated as a taxable profit and Class 1 NIC will also apply. Why do you pay fuel as part of the allowance? If you have claimed standard or regular user mileage allowance you will know that fuel is included in the allowance. However, for those drivers moving to the new scheme, from a scheme where fuel is paid separately, the fuel offset scheme can be confusing. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 9

10 There are a number of reasons why we use the fuel offset method of reimbursement and they include: 1. Simplification of quotation system 2. Reduction in VAT 3. Reduction in CBT and NIC 4. Contract mileage management 5. Reduced excess mileage charges 6. Reduced workload in payroll/expenses 7. Payment made in the month fuel purchased rather than one month later 8. Payment not dependent on submission date 9. Consistent treatment of fuel with regular user and standard user mileage rates 10. Ability to link rates to Inland Revenue Advisory Fuel Rates (AFR) 11. The average saving using this method is about per 4000 business miles The allowance is a lump sum and a mileage rate but the mileage rate is less than the fuel rate? The mileage rate is not the fuel allowance. The mileage allowance includes a number of elements and is set at a level that covers the additional cost of business travel. You should consider the total allowance when making comparisons and not just the mileage rate. We only break down the lump sum and mileage rate to determine the total allowance based on the estimated business mileage. For example the allowance for 5,000 miles is 3,100 (5,000 x 16p ) Therefore, if the AFR is 12p then the fuel element of the allowance is but the total allowance is 3, The principle of the scheme is that the Trust provides a vehicle for business use; but the driver can choose a more expensive car provided that they pay the additional cost including the additional cost of fuel if the car has high fuel consumption. If the allowance is always the same why not pay the same fuel rate to everyone? In simple terms we pay the advisory fuel rate to avoid any conflict with the Inland Revenue. There is a small tax advantage for applying the higher fuel rate to cars with high fuel consumption but more importantly if we pay a high fuel rate to a car with low fuel consumption there may be a tax charge. The reason we have not recommended a standard fuel rate is because it is more difficult to justify to the Inland Revenue that there is no fuel profit which could invoke a tax on the profit. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 10

11 Current advisory fuel rates from 1 st December 2010:- Engine Size Petrol Diesel LPG 1400 cc or less 13p 12p 9p 1401 cc to 2000 cc 15p 12p 10p Over 2000 cc 21p 15p 15p Northumberland Tyne and Wear NHS Foundation Trust are committed to taking all necessary steps to counter fraud and corruption. Information disclosed on standard documentation associated with the Lease Car Scheme will be used by the Trust and the NHS Counter Fraud Service for the purpose of investigation, prevention, detection and prosecution of fraud. Knowingly providing false information may result in disciplinary action and you may be liable for prosecution and civil recovery proceedings. All cases of suspected fraud will be reported to the Trust s Local Counter Fraud Specialist who will ensure the allegations are investigated and reported to the NHS Counter Fraud Service as appropriate. Further information can be obtained from the Fraud and Corruption Policy and Response Plan, NTW(O)23. NHS Fleet Lease Car Scheme Drivers Guide (June 2011) 11