If your employer offers you a ‘Cash for Car’ Scheme, are you fully aware of the implications?

Today, the company car plays a hugely important role in the British Economy; around half of all new cars each year are for business use.

Although the majority of company cars are inevitably ‘tools of the trade’, they also play a crucial role in employee image, provide mobility both inside and outside of work and is seen as a financially beneficial perk of employment.

Company cars also have a big financial impact on both businesses and employees. For a business, they are usually one of the biggest employment costs, and drivers are taxed on their provision.

But changes to the benefit-in-kind taxation system have forced businesses and drivers to re-evaluate the company car package.

Your employer may decide to maintain the status quo by retaining the traditional company car package, or like many companies today, they might instead offer you the option of a “Cash for Cars” scheme.

This booklet seeks to identify the key issues employees need to consider when being offered cash options.

Why should you be considering "Cash for Cars"now?

General awareness about company car tax issues has never been greater. It’s being driven by environmentally based changes to the benefit-in-kind company car tax with the Government’s Approved Mileage Allowance Payments (AMAP’s).

The government is committed to reducing carbon dioxide (CO2) emissions in the UK and the car is considered to be one of the main sources of this greenhouse gas. The benefit-in-kind tax and AMAP’s form part of an initiative to lower CO2 levels by encouraging drivers to choose smaller, more fuel-efficient cars and reduce the amount of business mileage they clock up.

It is thus vital to consider if the company car remains the correct choice for both drivers and companies – indeed, it may be worth looking into the broader subject of vehicle choice, and if opting out, the choice of funding methods.