I can turn Grey into Green – and only tax magic involved!

What is “grey” – the motor sector commonly refers to those employees who use their own cars for business trips as being part of a grey fleet.

What is “green” – in a company car context it is one with a low CO2 emissions rating and which will provide a low Benefit in Kind tax charge. For a diesel car – let’s say the Audi A4 (but there are a vast number of other models across the principle manufacturer brands) - the benefit in kind could be based on as low as 13% of the manufacturers list price.

So why is this interesting?

In direct terms it can save significant sums for both employer and employee whilst also providing a good deal more flexibility around car arrangements for both employee and employer.

Offering your employees the opportunity to be provided by you with a low CO2 emissions vehicle will result in a low benefit in kind tax charge. However providing this under a salary sacrifice arrangement will allow employee cost savings when compared with the amounts they would otherwise pay under a private agreement.

In essence the income tax and National Insurance saving made by the employee under a salary sacrifice arrangement exceeds the income tax due on the benefit in kind arising on the vehicle provided by the employer. The employer also benefits as the Class 1A National Insurance borne is lower as this is calculated on the benefit in kind.

In an arrangement we have recently implemented the employee saving per annum is in the region of £1,100. Importantly the employer National Insurance saving was almost £400. The benefits of offering this to a large employment group is clear….and grey is indeed green!

In addition, where your employees are using cars through a scheme like this you can be safe in the knowledge that the vehicles are new, fully maintained and fit for purpose. This will help to significantly reduce your business’ risk under the recently introduced corporate manslaughter legislation.

If you would like to explore this for your business please contact Tom Ogden at togden@edge-tax.com or on 01454 777857, or speak to your usual contact.