Car Allowance - is it better to salary?

martinsurrey

booksurr wrote: »

no, a car allowance is already subject to employer national insurance, therefore converting to "pay" will not increase the employer's costs in respect of NI as they already have to pay ER NI.
There is one way to reduce the employer's NI and that is to have car allowances whose size is proportional to the number of business miles travelled. That was the ruling coming out of a test case but there are specific steps which must be followed and it can lead to people of the same seniority level in the company getting different allowances paid depending on their mileage, so makes HR relations more complex!

? a company can never recover VAT on the purchase of a company car if the car is given to an employee for private use.

Also a car allowance is a cost for the business in exactly the same way as a salary is a cost for the business, no idea what difference you think there is in terms of company profit calculations?

thank you for pulling that comment apart, it is almost 100% wrong.

1) this one is true
2) wrong 100% car allownce is already NIable
3) wrong 100% both are treated exactly the same (100% tax allowable and written off in the year incurred)
4) wrong 100%, it would be a trivial exersice to add the total benefits packages together to see they are the same
5) if a company hires people purely because of the size of their current salary I don't think they will be competitors for long!
6) you might be surprised how easy it is.

singhini

Its good people are pulling the 6 points apart.

What I was trying to demonstrate to the OP was that the employer might not want to do it for various reasons such as the 6 points above (the employer might use anyone of the 6 points, all of the 6 points or even more reasons that they can think of). All I was doing was giving the OP examples of some of the things employers might say to get out of swapping car allowance into salary.

OP, my advice would be ask for the car allowance to be paid as salary and I'm sure both Booksurr and MartinSurrey will help you do this.

singhini

booksurr wrote: »

? a company can never recover VAT on the purchase of a company car if the car is given to an employee for private use.

The company can recover VAT on the monthly lease paid for the car (companies tend to lease cars from companies like LeasePlan).

Though I admit I have made a mistake on this i.e. the OP is not getting a car but an allowance thus the VAT dosent exist in the first place as no car has been acquired for the person

singhini

martinsurrey wrote: »

4) wrong 100%, it would be a trivial exersice to add the total benefits packages together to see they are the same
5) if a company hires people purely because of the size of their current salary I don't think they will be competitors for long!
6) you might be surprised how easy it is.

These sound like your opinion

martinsurrey

singhini wrote: »

The company can recover VAT on the monthly lease paid for the car (companies tend to lease cars from companies like LeasePlan).

wrong, they can only reclaim 50% of the input VAT on the lease of cars.

https://www.gov.uk/government/publications/vat-notice-70064-motoring-expenses/vat-notice-70064-motoring-expenses#input-tax-on-leased-cars

martinsurrey

singhini wrote: »

Its good people are pulling the 6 points apart.

What I was trying to demonstrate to the OP was that the employer might not want to do it for various reasons such as the 6 points above (the employer might use anyone of the 6 points, all of the 6 points or even more reasons that they can think of). All I was doing was giving the OP examples of some of the things employers might say to get out of swapping car allowance into salary.

OP, my advice would be ask for the car allowance to be paid as salary and I'm sure both Booksurr and MartinSurrey will help you do this.

singhini wrote: »

These sound like your opinion

If you've read the entire thread you'll see we both think its unlikely the company would do it, but not for the half baked reasons you gave.

and I will always highlight information that is misleading or wrong.

your opinion on a company who has different salaries but the same overall package for 2 people in the same role

"The employer might expose himself to HR issue i.e. another employee takes them to a tribunal saying they are being paid less and thus wage discriminated against as their on less money for doing the same job as you."

and my opinion is that that person would be laughed out of the tribunal, after paying to get there in these circumstances, why do you think they would be successful? I say their remuneration package is the same, so they are paid the same, so there is no discrimination.

can you back your opinion up?

singhini

martinsurrey wrote: »

wrong, they can only reclaim 50% of the input VAT on the lease of cars.

https://www.gov.uk/government/publications/vat-notice-70064-motoring-expenses/vat-notice-70064-motoring-expenses#input-tax-on-leased-cars

So you agree with me, yes they can claim VAT (I didn't specify a % I just said they can claim VAT which you too are agreeing with).

singhini

martinsurrey wrote: »

can you back your opinion up?

Employee A = £30,000 and employee B = £36,000

Employee A wants to know why is he/she being paid less and the answer is because we have lumped £6,000 into the salary while with you (employee A) we have given you the money as car allowance.

Employee A simply asks why did you do that, why are you treating people differently. On what basis are you doing this for one employee and not all employees. Why are you not treating all employees the same and offering all employees the same. why do treat people differently (If the employer is going to do it for the OP, they need to demonstrate their doing it/have offered it to all employees). Otherwise their going to expose themselves to bad practices / discriminatory practices.

booksurr

singhini wrote: »

Employee A = £30,000 and employee B = £36,000

Employee A wants to know why is he/she being paid less and the answer is because we have lumped £6,000 into the salary while with you (employee A) we have given you the money as car allowance..

it is clear that you have not got the detailed knowledge about UK tax treatment of "car" allowances so although your post was well intentioned, it was technically inaccurate and you now trying to keep it going serves no purpose.

The OP is long gone and whilst you, I, and martinsurrey, can come up with all sorts of scenarios to illustrate the subtleties between a car allowance on top of a gross versus an aggregated gross, no one is left who is interested in such an academic discussion.

Let's just close this conversation down rather you keep trying to come up with even more esoteric scenarios which again reveal you really don't understand how a car allowance is taxed, as both A and B would be taxed on 36k gross if the allowance was the 6k you use. Both are therefore being paid the same and both take home the same post tax.

singhini

booksurr wrote: »

it is clear that you have not got the detailed knowledge about UK tax treatment of "car" allowances so although your post was well intentioned, it was technically inaccurate and you now trying to keep it going serves no purpose.

The OP is long gone and whilst you, I, and martinsurrey, can come up with all sorts of scenarios to illustrate the subtleties between a car allowance on top of a gross versus an aggregated gross, no one is left who is interested in such an academic discussion.

Let's just close this conversation down rather you keep trying to come up with even more esoteric scenarios which again reveal you really don't understand how a car allowance is taxed, as both A and B would be taxed on 36k gross if the allowance was the 6k you use. Both are therefore being paid the same and both take home the same post tax.

Your very naughty, you quote my post referencing the £30k / £36k but ignored the more important second part which refers to how people are being treated (its not about how much tax is paid). it cant be honest or ethical to give some people £30k + £6k and others £36k (it certainly creates whispers in the workplace). That was my point (not tax)

Also you assumed the OP was long gone (he isn't, he thanked you for your post today :rotfl:)