Helen Swire clears up some of the confusion around recent legislative changes to salary sacrifice offerings and employee car provision

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Describing salary sacrifice as ‘unfair’ to those employees who can’t partake, Chancellor Philip Hammond used last year’s Autumn Statement to make significant changes to tax-efficient benefits.

Of all benefits to be eligible for salary sacrifice, only three were wholly safeguarded from the April 2017 change: childcare, pensions and cycle-to-work.

However – and causing no little confusion to employers – some car salary sacrifice packages are still allowed.

Pre-existing arrangements (those in place by April this year) will be protected until April 2021 – and for orders that have been made since April, employees can still buy in for certain vehicles.

It’s all about going green through ULEV (ultra-low emission vehicles): there will be tax and NI savings for cars with a CO2 of 75g/km or below, and cars with up to around 120g/km may still benefit from employee National Insurance savings.

“The new rules will have a major impact on some benefits by introducing a benefit in kind – however for those such as cars, healthcare and gym memberships there has always been a significant benefit in kind,” says Andrew Leech, director at Fleet Evolution. “These schemes have always relied on other factors to drive savings, such as volume discounts and other financial savings.”

Should you still buy in?

It is these extra savings factors that are so popular – as well as inclusive coverage of things such as insurance and MOT.

Paul Gilshan, chief marketing officer at Tusker, says: “Our research has found that cost savings are far from the main reason that people choose to join a salary sacrifice car scheme. More than three-quarters enter the scheme because of the all-inclusive, hassle-free package, which offers great value against other methods of driving a new car. These benefits are still there.”

And with a car remaining one of the biggest lifetime expenses for the average person, the impact can be huge in terms of staff engagement.

Leech says: “We know from our Driverline team about people who didn’t go through with moves as the new company they looked at didn’t allow similar schemes.”

Are there alternatives on the market?

So for those employers who don’t want to become involved with salary sacrifice, how can an engaging car benefit be provided?

“One alternative is to offer a personal leasing scheme, where the employee will benefit from the buying power of the lease company, and maybe also their employer,” suggests Guy Roberts, director of Novalease at sgfleet. “For employers there’ll be no risk and minimal administration.”

Higher mileage drivers, or simply employees who prefer a selection of cars to choose from, may find the option of personal leasing to be more economical or user-friendly.

“And for essential users don’t rule out employee car ownership schemes,” says Leech. “Such schemes are personal lease schemes but funded via a fuel reimbursement, attracting no tax for employee and employer.”

He adds: “In reality, little will change for most. And some of the cleanest cars will get even cheaper with proposed benefit-in-kind changes in 2020.”

Meanwhile, Roberts advises: “If an employer is considering a car benefit scheme, then they should speak to a provider that can offer not just salary sacrifice but all the options now available in the marketplace.”