The Pros And Cons Of Providing A Leased Vehicle To Employees

June 2, 2017

Pros and cons of providing a leased vehicle to employees

Providing a leased company Car

PROS

  • The company can reclaim 50% of the VAT on the lease
  • The company has control and peace of mind of the safety of the vehicle their employees are using
  • The company has full control of the vehicle choices and is able to limit the P11D values and CO2 emissions to ensure savings for the company
  • A company car provides travel security for employees
  • Provision of a company car is attractive when looking at both recruitment and staff retention
  • Better buying power
  • The company can benefit by offsetting a percentage against their corporation tax liability

CONS

  • When an employee leaves there may be a period of time where a vehicle is surplus to requirements
  • Administrative duties are required

Providing a Company Car Allowance

PROS

  • Drivers can claim AMAP (45p for the first 10,000 miles in a tax year; and 25p per mile thereafter)
  • Less research and planning for car procurement
  • Drivers have more vehicle choice

CONS

  • Risk of drivers doing more business miles than necessary because of the AMAP incentive
  • Drivers could look to purchase an older/used vehicle rather than entering a finance agreement themselves so to keep the additional allowance in their pocket – the company then needs to consider issues surrounding reliability and time off the road during working hours
  • Insurance policies must be taken out by the driver but reviewed individually by the employer to ensure appropriate cover has been arranged
  • The company will see an increase in Employer National Insurance as it is calculated based on the gross
  • The company is limited to what they can dictate around the choice of car the employee goes for
  • Grey Fleet Management is required by law

Grey Fleet

‘Grey Fleet’ is the term used to describe any vehicles that do not belong to the company, but which are used for business travel. When they are driven on company business, often in return for a cash allowance or fuel expense, these vehicles then become considered part of the ‘Grey Fleet’ – and as such fall under the responsibility of the employer.

Employers and employees also have a responsibility to ensure that others are not put at risk during any work-related driving activities. Grey Fleet is subject to the same health and safety controls as the company fleet. In practice, this means you have the same legal duty of care for grey fleet drivers as you would for those in a work supplied vehicle. What’s more, corporate manslaughter laws mean that the onus of having to prove your organisation has fulfilled its legal obligations following an incident can be a considerable burden.