Salary sacrifice car schemes – consumer rights warning

Grumpy_chap

Sullypants said:

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. 

There is a lot in that paragraph that may not be correct.
In particular, the reference to a regulated finance product.  I understand that the the contract between Arval and the employer will be an unregulated business-to-business contract and not subject to the requirements of regulated consumer finance.
This would also mean that any S75 (subject to value limits in any case) protections are not available because any supplier - creditor - debtor relationship would be broken.

For much the same reasons, IF the OP had any consumer rights (which I do not believe has been established beyond doubt in this thread but has so in the OP's assessment), I would understand that those consumer rights apply in favour of the OP against the OP's employer.

Sullypants said:

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. 

If we were to assume that consumer rights applied in favour of the individual taking a SS car, in which of the following cases would the OP consider that the consumer rights were available to the individual?  

1. Bigger Salary Package and no vehicle options.
2. Salary Package with company car (no option to forfeit the company car).
3. Salary Package with car allowance (no option to have a company car).
4. Salary Package with choice between company car or car allowance, takes company car.
5. Salary Package with choice between company car or car allowance, takes car allowance.
6. Reduced Salary Package with SS company car.

I think, from a legal perspective, option 6 (SS Car) would be directly equal to option 2.
I also think it would be close to impossible for legislation to be drafted such that consumer rights applied in option 6 but not in the case of options 2 or 4.

Sullypants said:

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.

How closely does your SS agreement actually reflect a PCH agreement?
Is the SS agreement really for goods?  Or is the SS agreement for service?

Looking online at a typical PCH offer, high in the search engine results:

• High upfront payment (initial rental) (12 months)
• Monthly payments
• Servicing not included
• Breakdown cover not included beyond first 12-months provided by manufacturer
• Insurance not included 
• VED included
• Tyres not included
• MoT not included
• Excess mileage fee applies
• No option to purchase written into the agreement (PCH NOT PCP)
• Affordability and credit referencing checks against the individual

Looking at how I understand a typical SS scheme would work (I also referenced a typical offer high in the search engine results):

• No deposit / upfront payment / initial rental
• Monthly payments via salary deduction
• Servicing included
• Breakdown cover included
• Insurance included
• VED included
• Tyres included
• MoT included
• Excess mileage fee may apply (dependent on specific agreement / fleet averaging by the employer etc.)
• No option to purchase written into the agreement
• No affordability or credit referencing checks against the individual

Even if the PCH car (use of goods for a fixed term) is deemed to be a contract for goods, there might be enough additional inclusions with the SS car that it becomes a contract for service.
The SS car seems rather more akin to hiring a car while on holiday, which I would very much consider to be a service, albeit with a longer duration.

Okell

I'm more confused now.

Ignoring the FOS/Arval aspect I thought the OP wanted to argue that the SS/car "hire" agreement was a contract for the hire of goods under the CRA - a contract enforceable under the CRA against the OP's employer.

But now the OP has accepted that his employer is not in the business of hiring out cars - which would be a requirement of the CRA and was debateable anyway - so the OP acceptes that the agreement is not covered by the CRA and the OP doesn't wnat to pursue his employer further? 

born_again

One thing here.
Was the mention that company is not the lessee.
If person leaves the company. Then the car has to be handed back. Even if they were moving to another company that used same lease company.

Sullypants

Grumpy_chap said:

Sullypants said:

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. 

There is a lot in that paragraph that may not be correct.
In particular, the reference to a regulated finance product.  I understand that the the contract between Arval and the employer will be an unregulated business-to-business contract and not subject to the requirements of regulated consumer finance.
This would also mean that any S75 (subject to value limits in any case) protections are not available because any supplier - creditor - debtor relationship would be broken.

For much the same reasons, IF the OP had any consumer rights (which I do not believe has been established beyond doubt in this thread but has so in the OP's assessment), I would understand that those consumer rights apply in favour of the OP against the OP's employer.

Sullypants said:

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. 

If we were to assume that consumer rights applied in favour of the individual taking a SS car, in which of the following cases would the OP consider that the consumer rights were available to the individual?  

1. Bigger Salary Package and no vehicle options.
2. Salary Package with company car (no option to forfeit the company car).
3. Salary Package with car allowance (no option to have a company car).
4. Salary Package with choice between company car or car allowance, takes company car.
5. Salary Package with choice between company car or car allowance, takes car allowance.
6. Reduced Salary Package with SS company car.

I think, from a legal perspective, option 6 (SS Car) would be directly equal to option 2.
I also think it would be close to impossible for legislation to be drafted such that consumer rights applied in option 6 but not in the case of options 2 or 4.

Sullypants said:

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.

How closely does your SS agreement actually reflect a PCH agreement?
Is the SS agreement really for goods?  Or is the SS agreement for service?

Looking online at a typical PCH offer, high in the search engine results:

• High upfront payment (initial rental) (12 months)
• Monthly payments
• Servicing not included
• Breakdown cover not included beyond first 12-months provided by manufacturer
• Insurance not included 
• VED included
• Tyres not included
• MoT not included
• Excess mileage fee applies
• No option to purchase written into the agreement (PCH NOT PCP)
• Affordability and credit referencing checks against the individual

Looking at how I understand a typical SS scheme would work (I also referenced a typical offer high in the search engine results):

• No deposit / upfront payment / initial rental
• Monthly payments via salary deduction
• Servicing included
• Breakdown cover included
• Insurance included
• VED included
• Tyres included
• MoT included
• Excess mileage fee may apply (dependent on specific agreement / fleet averaging by the employer etc.)
• No option to purchase written into the agreement
• No affordability or credit referencing checks against the individual

Even if the PCH car (use of goods for a fixed term) is deemed to be a contract for goods, there might be enough additional inclusions with the SS car that it becomes a contract for service.
The SS car seems rather more akin to hiring a car while on holiday, which I would very much consider to be a service, albeit with a longer duration.

I think a few key points are being lost in the comparison here.

Firstly, Arval is FCA regulated, and that means DISP applies. Whether they frame their agreement with my employer as B2B doesn’t change the fact that they’re providing a regulated leasing service in the UK market and they are bound to handle complaints in line with FCA rules. That’s not optional, and they don’t get to contract out of DISP by saying “it’s B2B” when the end user is a private individual.

Secondly, the substance of the arrangement is what matters under both DISP and CRA definitions. SS is just a payment mechanism a tax efficient way of structuring how I meet the cost of leasing a personal use vehicle. The deductions come out of my wages, I am the sole paying party, and the vehicle is used wholly for private purposes. That puts me squarely in the definition of “consumer” under DISP 2.7.3R and CRA 2015 s.2(3). Regardless of contract structure. 

On the options list (salary with or without company car/allowance/SS car):

• In scenarios 2 and 4 (traditional company cars), the employee does not personally bear the cost, the employer does, and the employee pays only the BIK.
• In scenario 6 (salary sacrifice), I do personally bear the cost, because my wages are directly exchanged for the use of the vehicle. That’s the key distinction. I’m not just taxed on a benefit, I am paying for the car out of my own gross pay. That makes it materially different to a traditional company car.

Lastly, on the “PCH vs SS” comparison. Yes, SS often bundles in insurance, servicing etc, but that doesn’t stop it being a hire of goods in substance. A package holiday also bundles flights, hotels and transfers, but that doesn’t turn it into something other than the supply of travel services that still fall under consumer law. Likewise here, the inclusion of services alongside the hire of a car doesn’t erase the fact the car itself is tangible goods being provided for personal use. CRA envisages mixed contracts (goods + services) and applies the relevant rights to each element.

So I’d argue it’s not akin to a short term car hire service. It’s functionally identical to a personal lease (PCH) with add ons, except paid through my wages. That’s why consumer protection should apply, otherwise you create a gap where thousands of people move from PCH to SS for tax efficiency and suddenly lose all protection.

Sullypants

Okell said:

I'm more confused now.

Ignoring the FOS/Arval aspect I thought the OP wanted to argue that the SS/car "hire" agreement was a contract for the hire of goods under the CRA - a contract enforceable under the CRA against the OP's employer.

But now the OP has accepted that his employer is not in the business of hiring out cars - which would be a requirement of the CRA and was debateable anyway - so the OP acceptes that the agreement is not covered by the CRA and the OP doesn't wnat to pursue his employer further? 

Not quite 😂 I haven’t accepted that the CRA doesn’t apply. What I’ve said consistently is that the structure of the paperwork shouldn’t overshadow the substance of the arrangement?

My employer is not “in the business” of hiring out cars, true, but they are the facilitator of a benefit which is funded directly by my wages. The actual trader supplying the goods and services is Arval, who is in the business of vehicle leasing, is FCA regulated, and is bound by both DISP and consumer protection law.

That’s the heart of my position! I am the end user, I bear the cost, and the vehicle is for wholly private use. That makes me a consumer under both DISP 2.7.3R and CRA 2015 s.2(3).

So this isn’t about me “not wanting” to pursue my employer, it’s about pursuing the correct party who is responsible and regulated to deal with complaints…Arval!! 

Sullypants

born_again said:

One thing here.
Was the mention that company is not the lessee.
If person leaves the company. Then the car has to be handed back. Even if they were moving to another company that used same lease company.

That’s true, if I were to leave my employer, the car would go back. But that doesn’t change the fact that during the term, I’m the one funding it through salary sacrifice and using it solely for personal use and not business or trade.

The hand back mechanism is just a function of how salary sacrifice schemes are structured. It doesn’t remove the reality that the arrangement mirrors a personal lease in practice. The key point is that I bear the cost and detriment, not my employer. That includes an early termination fee if I leave, it’s not free to hand back.  That’s why consumer protection should apply here, regardless of what happens if employment ends.

Grumpy_chap

Sullypants said:

I think a few key points are being lost in the comparison here.

Firstly, Arval is FCA regulated, and that means DISP applies. Whether they frame their agreement with my employer as B2B doesn’t change the fact that they’re providing a regulated leasing service in the UK market and they are bound to handle complaints in line with FCA rules. That’s not optional, and they don’t get to contract out of DISP by saying “it’s B2B” when the end user is a private individual.

Secondly, the substance of the arrangement is what matters under both DISP and CRA definitions. SS is just a payment mechanism a tax efficient way of structuring how I meet the cost of leasing a personal use vehicle. The deductions come out of my wages, I am the sole paying party, and the vehicle is used wholly for private purposes. That puts me squarely in the definition of “consumer” under DISP 2.7.3R and CRA 2015 s.2(3). Regardless of contract structure. 

IF you are a consumer, your agreement and consumer rights would be with your employer.

The agreement between your employer and ARVAL is B2B whether you like it or not.  Your employer is not bound to only ARVAL.  Your employer may source cars from ARVAL that are outside the SS scheme.  ARVAL may not know the difference.

Sullypants said:

On the options list (salary with or without company car/allowance/SS car):

• In scenarios 2 and 4 (traditional company cars), the employee does not personally bear the cost, the employer does, and the employee pays only the BIK.
• In scenario 6 (salary sacrifice), I do personally bear the cost, because my wages are directly exchanged for the use of the vehicle. That’s the key distinction. I’m not just taxed on a benefit, I am paying for the car out of my own gross pay. That makes it materially different to a traditional company car.

I disagree.

On the two options with the traditional company cars, the employee does personally bear the cost.  

In option 4 (company car or car allowance) that cost is immediately obvious to the employee - the car has cost the loss of the car allowance.

In any option, the company car is part of the salary package and the employee will take that into account when choosing to join the business or if considering to leave to another role in another business.  Ultimately, if the overall value of a job role is £X, it matters little whether that value includes a company car, the value is still £X.  Any employer offering a lot less than £X will lose staff.  Any employer offering a lot more than £X will go bankrupt.

Sullypants said:

It’s functionally identical to a personal lease (PCH) with add ons, except paid through my wages. That’s why consumer protection should apply, otherwise you create a gap where thousands of people move from PCH to SS for tax efficiency and suddenly lose all protection.

Possibly you do create a gap.  That might be intentionally or might be oversight.
However, there does seem to be some element of "have cake and eat cake" in your wish for all the consumer rights to apply.
The individual has a choice to take a regular PCH / PCP / car purchase arrangement - all of which are available to the general public without qualification (other than affordability).
Or the individual can take the lower cost SS car, which is not available to the general public and not necessarily subject to affordability either.  (An employer might allow an employee to join their SS car scheme only knowing the individual's gross salary and not aware of any liabilities the individual may have.)
Perhaps the trade off for the lower cost SS route is the car being outwith consumer agreements.



Obviously, you have not shared the details of your SS car agreement but it is my understanding that this type of agreement will not usually create any contractual relationship (privity of contract) between the individual and the lease company.  That lack of privity would usually prevent the individual claiming any rights directly from the lease company.

What is the legal basis on which you are establishing a claim against ARVAL in the absence of privity of contract?

If you have a claim against ARVAL, do you also consider that S75 rights apply (assuming the car is within the value limits)?



You have reached out to the forum for advice and comment / discussion about what rights you might have but defend every comment from a position of such robustness as to how certain your position is that makes it unclear why you have sought clarification.
In fact, the claimed certainty that you can pursue ARVAL and the desire to prove this is leaving the thread rather confusing - I really do not know what outcome you are actually seeking other than to pursue some legal crusade.

If this is about a policy / legal position which you think is incorrect and unjust, you may need to raise the matter with your MP for a change in the law.

Sullypants

Grumpy_chap said:

Sullypants said:

I think a few key points are being lost in the comparison here.

Firstly, Arval is FCA regulated, and that means DISP applies. Whether they frame their agreement with my employer as B2B doesn’t change the fact that they’re providing a regulated leasing service in the UK market and they are bound to handle complaints in line with FCA rules. That’s not optional, and they don’t get to contract out of DISP by saying “it’s B2B” when the end user is a private individual.

Secondly, the substance of the arrangement is what matters under both DISP and CRA definitions. SS is just a payment mechanism a tax efficient way of structuring how I meet the cost of leasing a personal use vehicle. The deductions come out of my wages, I am the sole paying party, and the vehicle is used wholly for private purposes. That puts me squarely in the definition of “consumer” under DISP 2.7.3R and CRA 2015 s.2(3). Regardless of contract structure. 

IF you are a consumer, your agreement and consumer rights would be with your employer.

The agreement between your employer and ARVAL is B2B whether you like it or not.  Your employer is not bound to only ARVAL.  Your employer may source cars from ARVAL that are outside the SS scheme.  ARVAL may not know the difference.

Sullypants said:

On the options list (salary with or without company car/allowance/SS car):

• In scenarios 2 and 4 (traditional company cars), the employee does not personally bear the cost, the employer does, and the employee pays only the BIK.
• In scenario 6 (salary sacrifice), I do personally bear the cost, because my wages are directly exchanged for the use of the vehicle. That’s the key distinction. I’m not just taxed on a benefit, I am paying for the car out of my own gross pay. That makes it materially different to a traditional company car.

I disagree.

On the two options with the traditional company cars, the employee does personally bear the cost.  

In option 4 (company car or car allowance) that cost is immediately obvious to the employee - the car has cost the loss of the car allowance.

In any option, the company car is part of the salary package and the employee will take that into account when choosing to join the business or if considering to leave to another role in another business.  Ultimately, if the overall value of a job role is £X, it matters little whether that value includes a company car, the value is still £X.  Any employer offering a lot less than £X will lose staff.  Any employer offering a lot more than £X will go bankrupt.

Sullypants said:

It’s functionally identical to a personal lease (PCH) with add ons, except paid through my wages. That’s why consumer protection should apply, otherwise you create a gap where thousands of people move from PCH to SS for tax efficiency and suddenly lose all protection.

Possibly you do create a gap.  That might be intentionally or might be oversight.
However, there does seem to be some element of "have cake and eat cake" in your wish for all the consumer rights to apply.
The individual has a choice to take a regular PCH / PCP / car purchase arrangement - all of which are available to the general public without qualification (other than affordability).
Or the individual can take the lower cost SS car, which is not available to the general public and not necessarily subject to affordability either.  (An employer might allow an employee to join their SS car scheme only knowing the individual's gross salary and not aware of any liabilities the individual may have.)
Perhaps the trade off for the lower cost SS route is the car being outwith consumer agreements.



Obviously, you have not shared the details of your SS car agreement but it is my understanding that this type of agreement will not usually create any contractual relationship (privity of contract) between the individual and the lease company.  That lack of privity would usually prevent the individual claiming any rights directly from the lease company.

What is the legal basis on which you are establishing a claim against ARVAL in the absence of privity of contract?

If you have a claim against ARVAL, do you also consider that S75 rights apply (assuming the car is within the value limits)?



You have reached out to the forum for advice and comment / discussion about what rights you might have but defend every comment from a position of such robustness as to how certain your position is that makes it unclear why you have sought clarification.
In fact, the claimed certainty that you can pursue ARVAL and the desire to prove this is leaving the thread rather confusing - I really do not know what outcome you are actually seeking other than to pursue some legal crusade.

If this is about a policy / legal position which you think is incorrect and unjust, you may need to raise the matter with your MP for a change in the law.

Here’s where I stand as clearly as possible:

1. Who I’m complaining about: 

The paper contract is B2B (employer & Arval), but my complaint is about Arval’s conduct as an FCA regulated firm. They’ve refused referral rights and misled me. FOS decides jurisdiction, not Arval.

2. Consumer status: 

With salary sacrifice, I give up my own wages for the car and still pay BiK. That makes me the end payer and end user, i.e. a consumer under FCA/CRA definitions.

3. No “trade off”: 

Saving tax doesn’t mean waiving statutory rights. If firms can strip protections just by calling it B2B, that’s a loophole.

4. Goods vs services: 

Salary sacrifice bundles extras, but the core is still the hire of the car (goods). CRA already handles mixed contracts: goods rules for goods, services rules for services 

5.What I want: 

I asked for a rejection to be accepted or a like for like swap without penalties, and for salary deductions to stop until such a time. Employer route stalled; so I’m using the regulator/ombudsman route, which is exactly what it’s there for.

6.Regulators vs MPs: 

Why would I bypass the FCA and FOS, the very regulators set up to examine and close gaps like this…and instead waste time with my MP, who won’t do a thing about an individual complaint? The correct channel is the regulator, not politics. And when regulators start to see patterns of complaints like this emerging, that’s when they recognise a systemic issue that needs closing.

If salary sacrifice users really had no consumer/ombudsman rights, that would leave hundreds of thousands exposed. That’s why I’m pushing this, not on a “crusade,” but to highlight a gap that big firms could exploit. 

And to be clear, I haven’t debunked advice here, I’ve challenged it in open debate. My aim is to make consumers aware of the risks. They are real. 

Sullypants

@Grumpy_chap

The forum isn’t just here for advice, it’s also a space to debate viewpoints and challenge the status quo together.

As I’ve already said, I’ve done my own due diligence and taken this through the proper channels. My complaint is logged with FOS, and not to sound arrogant, but I hope they see this for what it is and accept jurisdiction, which would prove my points.

And just to be clear, FOS have already upheld two salary sacrifice complaints. They don’t mirror my situation exactly, but they do show that FOS has jurisdiction in salary sacrifice cases. So I’m not the first.

Again i’ll be back once the FOS investigator looks at jurisdiction, if they wobble i’ll escalate for ombudsman jurisdiction review & let everyone know the outcome. 

Grumpy_chap

Sullypants said:

If salary sacrifice users really had no consumer/ombudsman rights, that would leave hundreds of thousands exposed. 

Yes, there might be a gap as I acknowledged in my previous post.  That gap might be intentional or it might be oversight.
If there is a gap (and I genuinely believe the current rules mean there is and consumer rights do not apply), that might require a rule change.

IF SS car users were to have consumer rights, how would any rules apply to the company car driver or individual with a car / car allowance choice who opts for the car? 
I can't see that the rules could differentiate, so that would mean consumer rights for all company car users.

AIUI, the current legal position is that the individual earning £X terminates that contract of employment  and agrees a new contract of employment to earn (£X - £5k) (or whatever the SS amount is) plus company car.  Thereafter, the individual has a company car and cannot be differentiated from the individual who simply took a new job with a company car.

Sullypants said:

The paper contract is B2B (employer & Arval), but my complaint is about Arval’s conduct as an FCA regulated firm. They’ve refused referral rights and misled me. FOS decides jurisdiction, not Arval.

AIUI, there is no such thing as an "FCA regulated firm" as such.  There are FCA regulated activities and some firms are regulated for those activities.  Those firms can also carry out other business outside of their regulated arena.  I understand that the B2B contract between the employer and ARVAL would fall outside the regulated area.

You may feel that is not how it should be to reflect this scenario, but I understand the above is how it is with the current rules.

In fact, the listing for ARVAL states that there are some regulated and some unregulated activities carried out by the business:
https://register.fca.org.uk/s/firm?id=001b000000MfRU1AAN
If your SS car is outside the regulated activities (which I really rather suspect it will be), then the FCA will likely simply say they cannot comment / case closed.

Sullypants said:

2. Consumer status: 

With salary sacrifice, I give up my own wages for the car and still pay BiK. That makes me the end payer and end user, i.e. a consumer under FCA/CRA definitions.

IF you are a consumer in this agreement to forfeit some salary in return for a car, then I still struggle to see how that consumer can have consumer rights against ARVAL (with whom there is no privity of contract).  The consumer rights would need to be claimed against the employer.

Sullypants said:

And just to be clear, FOS have already upheld two salary sacrifice complaints. They don’t mirror my situation exactly, but they do show that FOS has jurisdiction in salary sacrifice cases. So I’m not the first. 

I have missed it if you referenced this fact upthread.
If there is past history of the FOS commenting on SS matters, that might have sufficient detail to inform and influence the understanding and comments made in the thread.
Would you be able to link the previous two judgements?

I have undertaken a search and can only find two cases:

https://www.financial-ombudsman.org.uk/decision/DRN-4918736.pdf
MINI advised the individual the amount to pay to end their PCP early.
Based on that amount, the individual joined the SS scheme offered by the employer.
MINI then asked for more to end the PCP early.
That is a judgement about the early termination of a PCP scheme, not a judgement about SS.

https://www.financial-ombudsman.org.uk/decision/DRN-4944001.pdf
Total loss claim and the insurer paid out insufficient to settle the value of the vehicle as determined by the SS provider.
Insurer required to meet a higher valuation for the total loss claim.
That is a judgement about the insurance valuation of a total loss vehicle, not a judgement about SS.