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Why should you give a cash alternative?

• Mitigate the employees Benefit in Kind tax liability
• Evolve an employee flexible benefit options package
• Counter increasing fleet costs

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What should motivate you when you consider calculating the cash alternative?

• Do you wish to remain cost neutral when offering the cash option?
• If the employee elects to purchase the same vehicle as his company vehicle, would you wish him to be cost neutral?
  
  

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What should the cash option be?

• In order to arrive at the correct answer you would first need to decide on what basis you would establish your current costs. Computer modelling is the most cost efficient means of doing this, as it allows you to not only review your current costs but also benchmark them against competing products. Modelling considers the following items when establishing your current cost metrics.

• Having now established your current costs and preferred funding method, you can now begin to calculate the cash alternative. Again using computer modelling a cash alternative can be produced based on the post tax position of providing the company vehicle. Modelling considers the following items when establishing your cash alternative.

• Having now established the company neutral cash alternative, you now need to establish what it actually will relate to as far as the employee is concerned. Again modelling considers the following options when establishing the net cash allowance for the employee.

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Which employees could benefit from a cash alternative?

• Drivers of high emission vehicles
• High business mileage drivers, especially those who received a concession under the old tax regime
• Those who use their cash allowance to purchase a vehicle with low whole life costs ie high residual values

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What is the likely benefit to the employer?

With the right support a well thought out scheme can deliver quite considerable savings, especially in the following areas: -

• Fleet administration
• Insurance and accident liabilities
• Fuel provision
• Tax efficiencies especially through business mileage allowances
• VAT Scale charges

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What can the employee do with the cash you give?

• Use the cash allowance given to purchase an equivalent to his current vehicle
• Take the cash option and purchase a cheaper vehicle
• Take the cash option without purchasing a car

Whilst not an exhaustive list of questions and answers, by now you will at least have an appreciation for the complex nature of the subject. This is where one of our partner companies, such as Fleet Logistics UK Limited, can be of assistance.

A summary of their product offering in this area follows: -

• Data capture of current fleet data
• Establish current fleet cost metrics across grades (minimum of 6 employees)
• Establish the cash alternative for the employees within each grade
• Establish the employer cost neutral position for each employee
• Establish the benefit (cost) to the employee
• Establish the cash alternative required to allow the employee to purchase an equivalent vehicle to their company car
• Establish your benefit (cost) in allowing the employee to purchase an equivalent to their existing company car
• Produce a summary report
• Present and consult on results

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