Business FAQs
Q) What are the benefits of providing company cars?
A) For the employee:
Employees like the hassle-free aspects of having a new car provided
and looked after by their employer. The risk of ownership is
by way of the financial burden and credit liability with the
employer, who arranges appropriate insurance, servicing and
repairs and finally disposes of the vehicle. Employers are often
flexible in offering a considerable choice of cars. Furthermore
the status associated with company cars should not be underestimated.
A)
For the employer:
The main benefits to an employer in providing company cars are
the ability to maintain an element of control over both the
overall cost and the type of vehicle operated. Plus the fact
that company cars have traditionally been a very useful tool
in both new recruitment and employee retention.
Q) What are the downsides of providing company cars?
A) For the employee:
The major potential disadvantage of a company car for the employee
is benefit in kind taxation plus the fact that the employer
will re-possess the vehicle upon employment termination leaving
the employee without transport.
A) For the employer:
It can be expensive to administer and run a company car scheme,
depending on the extent of outsourcing and the funding option
used to provide the vehicles. The employer may also be at risk
from "bad" drivers - traditionally claims for company
car drivers have been greater than for other drivers.
Q) What are the benefits of "free"
fuel?
A) For the employee:
Traditionally the provision of "free" fuel was a valuable
benefit-in-kind. However with the change in tax structure, this
benefit has virtually disappeared, unless the employee is a
very high private mileage user. The remaining advantage is that
"free" fuel makes the process of claiming fuel for
business mileage very simple.
A) For the employer:
If a fuel card is used, it allows accurate fuel consumption
reports to be produced. It simplifies the payment of business
fuel expenses of employees, reducing administration.
Q) What are the downsides of "free"
fuel?
A) For the employee:
High taxes on this benefit mean that employees need to complete
much higher private mileage in order to justify receiving the
benefit. Furthermore the provision of a fuel card may limit
the employee to certain petrol stations only.
A) For the employer:
If private fuel is provided, this may be regarded as an environmentally
unfriendly policy - encouraging drivers to complete a certain
amount of private miles for the benefit to be tax efficient.
Q) Which employees generally get
a company car?
A) There are two criteria that usually determine
whether an employee receives a company car - business need and
status within the organisation.
The former is determined by annual business mileage, frequency
of journeys, the need to carry tools or samples and competitor
pressure.
The provision of a status car is a reflection of employment
market forces and most closely correlates to salary or status
in the company.
Q) What choice and value of car
do eligible employees normally receive?
A) The choice of car given to employees follows
one of three routes:
1. Specified car for a post or job grade
2. Choice from a list
3. Choice of any car up to a maximum list price or monthly lease
value
Generally the more senior the employee the greater the degree
of freedom of choice and the higher the value of the car.
Q) What proportion of company
car drivers are offered fuel for private motoring?
A) Traditionally the provision of private
fuel has been a highly valued benefit. In recent years however
there have been sharp rises in taxation of private fuel. This
has resulted in a marked decrease in the number of employees
who take the option of free fuel.
