14 December 2015

Activa targets company car drivers and cash allowance employees with client ‘Electric Getaway' Roadshow

Activa Contracts has held the first in what it plans to be a series of client roadshows highlighting the tax-efficient benefits of ultra-low emission vehicles.

The roadshows enable company car and cash allowance drivers to view the very latest pure electric and plug-in hybrid cars while also discovering the benefit-in-kind tax saving potential offered if they selected such models as their next vehicle.

Billed as the ‘Electric Getaway’ Roadshow, the event also enables employees to view other low emission models that fall outside the industry definition of an ultra-low emission car, which is one with carbon dioxide (CO2) emissions of 75 g/km or less.

The objective of the roadshow is two-fold:

• To enable existing company car drivers to view the very latest ultra-low emission cars, understand issues such as vehicle range and charging requirements associated with plug-in cars as well as the tax implications versus their current vehicle.
• To highlight to employees who have opted to take a cash allowance in lieu of a company car that their current choice is almost certainly poor value versus the greater tax efficiency of the latter.

Company car benefit-in-kind tax rates have been published up to the end of the 2019/20 financial year, and they rise year-on-year. It means that in 2015/16 the driver of a car with CO2 emissions of 0–50g/km will see their benefit-in-kind tax bill rise from 5% of P11D value to 16%.

However, even with the tax increases company cars continue to deliver better value to employees than cash.

Basic and higher rate taxpayers pay tax and National Insurance on a salary of 32% and 42% respectively. Even when the appropriate percentage of company car tax has risen to 16% (0–50 g/km models) in 2019/20, the effective tax rate on a company car is 3.2% of the P11D value per annum for a basic rate taxpayer – 6.4% for a higher rate taxpayer.

Activa Contracts uses a calculator developed by professional services firm Deloitte to highlight to individual employees the true ‘net’ value of a company car versus that of a cash allowance.

Active Contracts’ managing director Ian Hill said: ‘During the roadshows and subsequently we are able to go into detail with individual employees and show the net cost to them of choosing a company car or taking a cash allowance. It is virtually always the case that employees are better off choosing a company car.

‘What’s more, the lower a car’s emissions the greater the financial saving in favour of company cars because of the lower tax burden. Therefore, ultra-low emission and plug-in vehicles make sound financial sense.’

The first client roadshow highlighted a wide range of cars including the plug-in Audi A3 Sportback e-tron, BMW i3, Mitsubishi Outlander PHEV and Volkswagen Golf GTE as well as low emission versions of the BMW 1 Series and BMW 3 Series.

The UK is the fastest growing market for electric vehicles in Europe spurred on by a government with a long-term commitment to ultra-low carbon motoring – and it is the corporate sector that is leading the charge.

From city run-arounds and family hatchbacks, to 4x4s and sports cars, there is already a wide range of plug-in vehicles to meet corporate and employee demands. Fleet choice will continue to further increase with an additional 40 models expected to come to the market over the next three years, according to the Department for Transport.

Mr Hill said: ‘The first roadshow was very successful. We had valuable discussions directly with company car and cash allowance drivers and were able to supply them with key information and advice on new models and their tax implications.

‘We will be taking the roadshow to other clients over the coming weeks and months. Our team of account managers is recommending the ‘Electric Getaway’ Roadshow to clients where they think it appropriate.’