Real world examples | Employee car ownership
The client, a global telecommunications service company, identified the negative impact a change to the company car tax regime would have on some of its key staff, resulting in 3,000 management grade employees being financially disadvantaged.
To compensate these individuals, leaving them in a tax neutral position, would cost in excess of £3M per annum and over the remaining life of the existing company car fleet structure this would equate to £10M in additional employee costs.
We explored a number of ways of mitigating the additional employee costs, whilst ensuring that any alternative approaches would appeal to both the employee and employer. We undertook a thorough analysis of the tax regime and employee use for each of the 3,000 vehicles to determine the individual impact on each employee both financial and non-financial of any changes that we may propose.
We identified the potential for the introduction of a new employee car ownership scheme for the individuals affected, and completed a risk and impact analysis with our client and a number of employees to establish appropriate criteria and issues surrounding implementation. Under the employee car ownership scheme, we transferred the ownership of the vehicles to the employees with the funding provided on very specific terms by a third party. At a corporate level, our financial evaluation revealed potential savings in the range of £4M to £6M depending on employee take up.
In the end the number of employees transferring to the new employee car ownership scheme exceeded all expectations. And the benefit to the company was circa £7M. In summary, we created, engineered, tested and implemented a cutting edge financial solution that created a win-win for the employee and employer, whilst ensuring all regulatory and compliance issues were fully adhered to.