Car
Allowances as a financial
tool
For
some car allowances are
used as a tool for delivering ‘company
cars’ in
a more tax efficient manner,
these are commonly known as
ECO or ‘Employee
Car Ownership’ schemes.
ECO schemes make effective
use of ‘Tax
Free’ business
mileage rates to reduce the
amount of taxable ‘Car
Allowance’ necessary
to fund the business car,
and can be an attractive
proposition if you have high
mileage drivers.
Whereas
the principles that govern
these schemes are pretty much
consistent across a range
of products on the market,
the methods of calculation
and sometimes the components
used vary dramatically from
provider to provider and as
such the evaluation of schemes
can be exceedingly complex.
Couple
the complexity
with the necessary
variations in compensation
and tax efficiency
that will be inevitable
with a driving population
driving different
vehicles, with
different mileage
patterns and with
different tax codes,
you may find that
you have only the
product provider’s
word and sometimes
loaded calculations
as the basis for
critical decisions.
Additionally,
these schemes, regardless
of the sales speak, are quite
demanding in terms of resource,
and as such you will need
to take account of internal
and outsourced structure when
taking decisions.
Fleetworx
have experience
with many different
schemes, and can
help you evaluate
these from a level
playing field. We
also know where
licence is taken
on ‘projected
savings’ and
can highlight the militating
circumstances that need consideration.
We
have the tools
and experience that
you need on your
side of the table
to help create ECO
solutions where
both parties have
their eyes open
and that can be
effectively measured
going forward.Section
–
Car
Allowances as Alternatives
Most
businesses today offer car
allowances in lieu of company
cars, to some extent within
their business.
For
many it is a method of delivering
greater flexibility and choice,
and where restrictive company
car policies are in place
this can present an attractive
proposition. It is important,
however for all concerned
to recognise the cost of cash
allowances to the business
and the value to employees,
if these are to managed and
communicated effectively.
Fleetworx
have a clear understanding
of the principle drivers of
cost and value in all car
allowance situations and,
aided by our sophisticated
software package, are able
to help you create car allowances
that meet your key objectives,
whether that be to contain
costs to the business whilst
offering a realistic alternative,
or whether that is to encourage
drivers in one direction or
the other through meeting
their personal aspirations.
We
have found that where accountants
may be able to help with the
pure economics of calculating
breakeven points, our specialist
market knowledge and experience
with the commercial and operational
aspects of running car and
cash policies, gives us a
serious advantage when helping
our clients create equitable
solutions.
Car
Allowance review projects
range from updating benchmark
breakeven points on a handful
of grades, right through
to a driver by driver cost
/ benefit analysis across
several hundred employees,
the latter being the exception
rather than the rule, however
essential where drivers are
being forced in one direction
or another.