Salary sacrifice car schemes – consumer rights warning

Grumpy_chap

Jenni_D said:

Just a point of curiosity ... if a SS lease is just another way of taking out a lease contract, and the car is only for personal use (not for business use), why is Benefit In Kind tax liable?

The BiK is levied for the personal use benefit.
IF a vehicle can be proven (very rarely successful) that it is for business use only, then the BiK can be avoided.

A_Geordie said:

I am not sure why you think you have a case against Arval to raise a complaint when you have no contractual relationship with them. That relationship is with your employer and the privity of contract principle applies. If anything, you should be directing a complaint to your employer who is the party that supplied you with the car. 

I agree, and there is very probably a company car policy that deals with how issues are raised.  The OP has not responded to previous posts suggesting to raise the matter with their employer, preferring instead to focus on some crusade against the lease company / finance company and CRA.

As has been mentioned upthread, the ability to influence the resolution is probably far stronger via a company scheme (where risk of quantity of business can happen) than as one individual.

Sullypants

Jenni_D said:

Just a point of curiosity ... if a SS lease is just another way of taking out a lease contract, and the car is only for personal use (not for business use), why is Benefit In Kind tax liable?

Benefit in Kind tax applies because the car is technically provided by the employer as part of your remuneration package. HMRC treats it as a non cash benefit rather than part of your core salary. But the thing is how HMRC taxes the arrangement doesn’t change the legal status of the end user. From a consumer protection perspective, salary sacrifice is just a tax efficient payment mechanism. The fact that HMRC applies BIK doesn’t mean the employee isn’t a consumer, it simply means the government is taxing the value of the benefit received, so BIK is a matter of tax law. 

Sullypants

A_Geordie said:

Sullypants said:

3. The Regulatory angle, regardless of the technical debate, Arval are FCA regulated and subject to DISP. DISP doesn’t let firms pick and choose which consumers they treat as eligible based on contractual form. It uses the same “natural person acting outside their trade/business” test. That’s exactly what applies to salary sacrifice end users like me.

I am not sure why you think you have a case against Arval to raise a complaint when you have no contractual relationship with them. That relationship is with your employer and the privity of contract principle applies. If anything, you should be directing a complaint to your employer who is the party that supplied you with the car. Please correct me if I have not understood as I thought the whole debate was about your variation to your employment contract, suggesting the supply is via your employer not Arval.

That’s a fair point, but why i believe i have a case against Arval is because while the contractual paperwork sits between Arval and my employer, the reality is that Arval are the regulated finance provider. They’re FCA authorised, they collect payment (via salary sacrifice deductions), and they’re the firm responsible for handling complaints under FCA DISP rules. This has also been confirmed by consumer advice. 

How I’m looking at it is that I’m the one bearing the financial detriment, part of my gross salary is exchanged for the vehicle, which I use it solely for personal/domestic purposes. That makes me the end consumer in principle. The FCA’s DISP rules (2.7.3R) & the Consumer Rights Act 2015 back that up.

My employer is not in the business of supplying cars, they facilitate the deduction, you could look at it like they’re a guarantor. Arval are the trader supplying the car. Trying to route this as an “employment issue” ignores the substance of the arrangement and leaves folk exposed, which is the regulatory gap I’m highlighting.

So yeh, the employer is technically the contracting party. But in practice, I’m the paying consumer, Arval is the regulated firm, and consumer law/regulation is designed to prevent firms hiding behind structures like this to avoid accountability. 

Sullypants

Grumpy_chap said:

Jenni_D said:

Just a point of curiosity ... if a SS lease is just another way of taking out a lease contract, and the car is only for personal use (not for business use), why is Benefit In Kind tax liable?

The BiK is levied for the personal use benefit.
IF a vehicle can be proven (very rarely successful) that it is for business use only, then the BiK can be avoided.

A_Geordie said:

I am not sure why you think you have a case against Arval to raise a complaint when you have no contractual relationship with them. That relationship is with your employer and the privity of contract principle applies. If anything, you should be directing a complaint to your employer who is the party that supplied you with the car. 

I agree, and there is very probably a company car policy that deals with how issues are raised.  The OP has not responded to previous posts suggesting to raise the matter with their employer, preferring instead to focus on some crusade against the lease company / finance company and CRA.

As has been mentioned upthread, the ability to influence the resolution is probably far stronger via a company scheme (where risk of quantity of business can happen) than as one individual.

I have in fact raised this with my employer and followed the proper channels through the company scheme from the very start. My employer has effectively washed their hands of it to avoid being dragged in to a legal dispute and Arval, the lease company have repeatedly deflected responsibility onto Mercedes.

So this isn’t a case of me “choosing a crusade.” I’ve exhausted the company route and been left with no option but to escalate directly against the FCA regulated firm providing the car. That’s exactly why regulatory protections exist, to prevent consumers being left stuck in limbo while large firms point fingers at one another.

Frankly, having the attitude that this should all be left at employer level only opens the floodgates for large firms like Arval to steamroll consumers through loopholes and technicalities. 

Sullypants

This whole situation is clearly a legal and regulatory minefield. I’m not saying the FOS must accept jurisdiction, that’s their call. I strongly believe they should. The way the laws and regulations are structured, the substance makes clear that regardless of contract structure, tax law or employment law. I believe Salary sacrifice schemes ultimately cover the end user, but that’s not for me, Arval, or my employer to decide. Closing regulatory gaps is at the core of what the Ombudsman exists to do. If they ignore this, it wouldn’t just fail me or anyone in a salary sacrifice as a consumer, it would undermine the reason the Ombudsman exists! 

I’ll do my utmost to push this forward, not because I’m on some “crusade,” but because whether you lease a vehicle privately or via salary sacrifice, the same consumer principles and laws should apply. Suggesting otherwise, that people in a salary sacrifice should simply forfeit their rights and keep paying no matter what is frankly, part of the problem.

I’ll go quiet here for now until I hear back from FOS. I’ll update as soon as I have news, hopefully moving in the right direction.

Sullypants

molerat said:

Jenni_D said:

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

But isn't a salary sacrifice car actually a personal car, not a company car? The employee is (probably) not paying Benefit In Kind tax on the vehicle, rather they are taking some of their "salary" in the form of a car, so it's not a company car?

Nope, sal sac is a company car with a BIK.  Something a lot of people taking these schemes fail to understand and complain when they get hit with tax.  The taxman ain't gonna pay for 28%+ of personal drive around costs.

It’s important to be clear, a salary sacrifice car is only “treated” as a company car for tax purposes. That doesn’t mean it actually is one in substance.

The difference with salary sacrifice is that the employee gives up part of their salary to fund the lease, so you’re the one paying, and the car is for your personal use, not for work. That’s why it mirrors a private lease almost to a tee.

HMRC apply BIK tax because the benefit flows through your employment, but that’s just a tax treatment mechanism. It doesn’t change the fact that, in practice, you’re effectively leasing the car personally.

Sullypants

Grumpy_chap said:

Jenni_D said:

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

But isn't a salary sacrifice car actually a personal car, not a company car? The employee is (probably) not paying Benefit In Kind tax on the vehicle, rather they are taking some of their "salary" in the form of a car, so it's not a company car?

No, it is not a personal car.
The employee negotiates a new contract with the employer whereby their base salary reduces but the new reward package includes the company car as well.  The company car is then treated for BIK purposes the same as any other company car.  It so happens that the BIK for EVs is very low (presently).

The rules for SS specifically require that there is a change to the contract of employment:
https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

Let's consider the scenarios I suggested above, but with a third option added in:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car at the same employer as A.

C - OP leaves employer and starts a new job elsewhere at salary of £35k plus company car.

It would be absurd for B & C to be treated differently.

I think there is wide spread misunderstanding about SS schemes (whether for car, more pension, or whatever).  The reduced salary can impact employer pension contributions, reduced salary in the event of redundancy situation, etc.
On the flip side, the reduced salary can increase entitlement for means-tested benefits.

I don’t disagree that HMRC requires a contractual variation and that for tax purposes a salary sacrifice car is “treated” as a company car. But that’s not the same as saying it is one in substance.

The whole point of salary sacrifice is that the employee personally bears the financial cost by giving up part of their gross salary. The car is then used exclusively for personal use. That mirrors a private lease, the only real difference is the tax treatment and payment mechanism.

BIK rules are a tax issue, not a consumer rights issue. Tax law doesn’t override consumer law. A consumer is still defined in DISP 2.7.3R and CRA 2015 as an individual acting outside their trade or profession. That’s exactly the position for anyone in a salary sacrifice car.

So yeh, HMRC treats the benefit like a company car. But in practice and legal substance, it’s the employee paying for and using the car personally which is why consumer protections should apply.

Sullypants

A_Geordie said:

Grumpy_chap said:

A_Geordie said:

the employer has hired the goods out to the employee.

Has the employer hired out the goods to the employee though?
I am not convinced that contractual situation has arisen.

It seems clear to me for the rules around SS:
https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

• There must be a change to the employment contract.
• There cannot be the freedom for the employee to swap in and out of the SS scheme at will.

I currently have a car through SS and the varied terms state that my salary is reduced by X for a period of X years which is the length of time I have the car for and when that term expires, I return the car. I am not allowed to hand the car back or vary the terms during that period without incurring a penalty, unless there are certain trigger events that occur such as when I am made redundant, in which case the variation is terminated and I am to return the car penalty-free. 

If the goods are not hired out, then what woud you call that arrangement? The arrangement of the car meets the criteria for the definition of a hiring under the CRA. Cannot see how it can be determined as something else but open to other suggestions. The fact that the car is a BIK does not alter my view that the employer is still supplying goods to the employee on terms dictated by the employer via a variation agreement. 

That’s exactly the point, what you’ve described is a hire arrangement. You exchange part of your earned wages for use of goodsfor a fixed term, with penalties for early return. That structure mirrors a Personal Contract Hire agreement in every way, other than the payment route. The fact HMRC classifies the car as a BIK for tax doesn’t change its legal character under consumer law.

Sullypants

Grumpy_chap said:

Okell said:

OK.  I wasn't sure you had answered it previously but - if I understand you correctly now - you are saying it simply forms part of the employee's remuneration package*.

Yes.
That is how I understand it.
I do not believe it is a hire and therefore affording consumer rights to the individual.

I gave an example upthread of how being an employee does not mean you can never have consumer rights on an item acquired from the employer.  The difference I used was a Car Sales Representative having the use of a car as part of their remuneration package (not consumer) versus the same Car Sales Representative buying a car for family use and happening to buy from his employer the Car Dealer (consumer).

Grumpy_chap said:

Let's consider a Car Sales Representative working for a Car Dealer.

If the Car Sales Representative sells that car to a Consumer, then the Consumer has consumer rights for the purchase from the Car Dealer.

It is common that a Car Dealer provides the Car Sales Representative with the use of a car, and this is part of the salary and reward package.  The use of the car is subject to BiK in the same way as for any Employee of any company.  The salary and reward package might also include pension contributions, healthcare or whatever.  However, that use of the car by the Car Sales Representative (even as part of the salary and reward package) does not create a consumer relationship between the Car Sales Representative and the Car Dealer - that relationship remains one of Employee - Employer.

The fact the Car Sales Representative is an Employee of the Car Dealer does not of itself preclude a Consumer relationship from existing at the same time as the Employee - Employer relationship exists.  I just do not consider that the use of the car within the salary and reward package creates this Consumer relationship.  The Consumer relationship would be created if the Car Sales Representative used their post-tax income to purchase a car from the Car Dealer.

I can give another example:
An individual works for a High Street electronic goods retailer and, in the course of their employment, is provided with a laptop which can also be used for personal purposes.  Not a consumer.
The same individual buys a top of the range gaming laptop from the same High Street electronic goods retailer.  Consumer.


I also think, given the high number of online articles about SS car schemes, if consumer rights applied at least some of the articles would comment on that and the mechanism for resolving any issues.

In fact, from a practical perspective, the ability of an individual with the weight of a company behind them probably makes it far easier to get any issues resolved than an individual as a consumer. 
I know when I worked for a company and they had the first Vauxhall Vectra's, there was some issue so gear boxes were failing after around 14k miles.  The first few went through and paid for repairs.  As the number of cases grew, the Fleet Manager got involved and simply wrote to Vauxhall instructing them to resolve the issue or have Vauxhall taken off the fleet list.  The response was practically instant and the resolution positive.
Any individual saying "I'll bever buy another Vauxhall (or Mercedes in the OP's case) will be just met with a shrug.

This all really rather makes me wonder whether there is more to the OP's case than they are letting on.  Has the OP even raised it as a query with the employer?

Sullypants said:

Just wanted to share my experience as I think it exposes a serious gap that could affect anyone using a salary sacrifice car scheme.

I got a brand new Mercedes EQB in June 2025 via my employer’s salary sacrifice scheme (through Arval UK). Within 3 days, I reported major suspension issues. After 5 failed repair attempts and over 15 days in workshops, the fault still isn’t fixed.

When I rejected the car, Arval refused. Their legal team even told me:

• Consumer law doesn’t apply because the contract is technically between them and my employer.

• The Ombudsman has no jurisdiction.

• Scots law doesn’t apply because the contract specifies English law.

All of this is completely wrong. I’m the one paying (through salary deductions) and the car is for my personal/family use only. The Financial Ombudsman Service has now accepted my case.

The bigger issue:

Salary sacrifice schemes are growing fast, but providers seem to be exploiting technicalities to deny employees their consumer rights. Many people would be misled by what I was told and simply give up.

If you’re in a salary sacrifice scheme, please be aware: you do have consumer rights, and the Ombudsman can take your case.

If anyone is going through something similar please share your thoughts or experience. Also anyone needing any help regarding this, I’ll do my best to help. 

It will be interesting to see how the OP updates when the Financial Ombudsman reports back and the outcome.  I remain very surprised that the Financial Ombudsman has taken a consumer case where the individual has not entered into a finance agreement.

True, I didn’t sign a finance contract with Arval, but that doesn’t mean I’m not a consumer. I’m sacrificing wages, using the car for personal purposes, and suffering detriment with everything thats going wrong with the car. Which is putting me in a practical and financially worse of state. Under FCA DISP and CRA definitions, that makes me a consumer. The Ombudsman exists to deal with  these kinds of grey areas and here’s hoping they see what’s going on and take action to close that gap in order to protect folk.

Sullypants

I also doubt very much that the FOS have "accepted the case" as the OP says. 

I imagine the OP has completed a complaint form and the case is in the queue to be allocated an investigator. As soon as the Investigator checks the facts (and certainly when they contact the respondent) it will go to a jurisdiction decision and be closed as not something they can investigate. 

The FOS have assigned me a case number and confirmed it is logged. You’re correct that it will go through a jurisdiction check before progressing, but that’s not the same as closing it down. Jurisdiction isn’t decided by Arval, it’s decided by the Ombudsman. And given the FCA DISP rules and consumer definitions under CRA, I’m confident there is a solid basis for them to accept it. It’s literally the core of why the FOS exists,to close regulatory gaps. The FOS isn’t there just to answer complaints or disputes. Their statutory role is to resolve disputes fairly and reasonably, considering FCA rules, consumer law, and good industry practice. That includes looking at regulatory gaps where consumers would otherwise fall through the cracks. Salary sacrifice car schemes are exactly the kind of area they’re meant to examine, it’s literally their role to decide jurisdiction and ensure consumers aren’t left unprotected.And that consideration applies despite how contracts are written up, or how tax and employment law treat the arrangement. what matters is the substance of the complaint and the consumer detriment.