DRO & Salary sacrafice vehicles

deaneweeny

Hi everyone

I am contemplating a DRO and have a question which the debt charities cannot seem to answer, I wonder if anyone has experience of my problem?

I currently have a salary sacrifice vehicle through my employer and was wondering what the official receivers view would likely to be on this?
Would they include the money I pay for the vehicle as salary (even though it is not spare money) and decline the DRO or just include it as a liability?

I am so confused about this and it is the only thing stopping me doing the DRO.

Any advice would be much appreciated.

ToxtethO'Grady

A DRO doesn't usually allow a car on HP unless it is essential due to disability or situation.

To give more advice I would ask for a bit more information.

It can depend on your work situation, do you need the car to do your job?
Do you live in a rural area?
What the agreement is (HP/lease/conditional sale)?
When does it end?
How much is the salary sacrifice a month?
Does the agreement have an insolvency clause?

fatbelly

I think your questions are

Would it be an allowable expense?
Would it be classed as an asset?
Would it be classed as a debt?

Can you post a link to the scheme and we'll have a look at it.

deaneweeny

Thanks for your guidance.

www.zenith
.co
uk/factsnotfiction/

fatbelly

Hi

I couldn't find the exact terms and conditions about your scheme but it seems that it's a variation on a lease scheme, with the payments coming from your salary before tax. There is nothing explicit in the guidelines and only vague instructions on the CAB site that do not relate specifically to salary sacrifice. So if we take those questions in reverse order:

Would it be classed as a debt?

There are circumstances in which it might produce a debt as you seem to be locked in to a scheme for 2 or 3 years. So if you leave early it is likely that your employer or the scheme operator will bill you. But in the normal course of things it would not appear on the list of liabilities and wouldn't count towards your £20k limit

Would it be classed as an asset?

Although you might be listed as a registered keeper, it seems that the owner remains as the employer or the scheme operator. It would therefore not need to be declared as an asset and wouldn't count towards your £1k limit

Would it be an allowable expense?

This is where it gets interesting. The CAB site assumes the lease payments are made from your income, not from before you receive it. Even so, it says

There is no specific trigger figure that would determine an ‘allowable’ amount to spend on lease hire vehicles or items

And it doesn't really help us when you are already in a contract and may be out of the DRO before the contract finishes.

I haven't met this yet in my area (very high unemployment) but I think I would just put your net income as your income and so the scheme would not appear as an expense at all. But I might put a comment in the form of a note.

deaneweeny

Thank you Fatbelly for your help and research, I really appreciate it. The salary sacrifice vehicle comes up for renewal roughly at the mid point of the DRO. Do you think the salary sacrifice company would check this and have an issue with it?

fatbelly

deaneweeny wrote: »

Thank you Fatbelly for your help and research, I really appreciate it. The salary sacrifice vehicle comes up for renewal roughly at the mid point of the DRO. Do you think the salary sacrifice company would check this and have an issue with it?

No, because as I understand it no credit check is done. However, if the DRO Team look into it they may well ask whether it is fair for you to renew, or whether you should be released from the DRO at that point, having greater than £50 per month surplus income.

What we really need is someone who has had experience with a salary sacrifice scheme in a DRO, maybe Debt Doctor or DorisTrousers.

DorisTrousers

I would probably feel that, if the car was essential for work, that it is indeed an allowable expense, provided it were not an unreasonable amount. I would be interested to know what amount of money is sacrificed prior to the remainder of your income being taxed. Rule of thumb only but anything up to £220, maybe £250 per month would be my own personal benchmark.

As for when it is due for renewal, that seems more simple to me. Either you can renew it (I would caution you against paying more from your salary than you currently are) or you don't. If you don't, then there is more money available. Like as not though, the cost of public transport in order to be able to do your job efficiently will be similar, if not more. If that is incorrect then of course you run the risk of revocation, but that is unusual in my experience.