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Avoid following government’s knee jerk decision on salary sacrifice

David Bushnell Alphabet
Alphabet's David Bushnell: words of caution

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26 April 2017

Knee jerk decisions following this week’s Finance Bill reading may leave you ‘washed up’ says David Bushnell, product manager – mobility, at Alphabet

The reading of the Finance Bill in the House of Commons ‘wash up’ sessions has revealed that Optional Remuneration Arrangements (OpRAs – or ‘salary sacrifice’ as we more commonly know it) and the Vehicle Excise Duty changes have been included in the Bill proposed.

But interestingly the elements on taxable benefits for Ultra Low Emission Vehicles and first year capital allowances on workplace charging have been ‘cut’ – among a host of other initiatives. Only time will tell whether that means these have simply been delayed until the Autumn Budget or are now up for debate again.

With the snap General Election announced, the Finance Bill had to be introduced before Parliament is dissolved on 3 May and clearly some things have had to be removed from it in order to avoid the financial wheels of Government grinding to a halt. Which is itself a good analogy for the strategic value of mobility to a modern business.

The industry had pushed hard for the original Finance Bill to be discussed and debated at length so that the implications of the changes proposed were fully understood. The concern was that this Finance Bill was a ‘knee jerk’ reaction to the issues of a declining tax revenue base and concerns about air quality.

Our key message to fleet decision makers around the UK is for themselves not to make a knee-jerk, short-termist reaction to the Government’s proposed changes.

Some corporates may be mulling over that offering ‘cash’ to employees is more straightforward, simpler and possibly cheaper alternative to offering a company car. But this views the company car purely as a cost or a ‘perk’ – it doesn’t recognise that a car is often an essential tool which is an investment in the cost of doing business.

Similarly, for any organisations considering such a move, don’t rush into action without expert help and advice. You may find the cash allowances you set actually cost more than a company car programme and incentivise wrong behaviours like over-inflating business mileage and ‘double-dipping’ on travel expenses.

Don’t under-estimate the benefits of company car schemes to employees and its value for recruitment and retention. Finally, no organisation should be under any misconception that their environmental responsibilities and duty of care obligations simply disappear with moving to a cash option – however your levers to control and influence these would be significantly reduced.

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