The Limitations Of Salary Sacrifice Schemes

Saturday, 10. September 2011

Hi, Graham Hill here, thank you so much for visiting my blog, I hope you learn a lot and as a result end up driving a great car. In order to do so you can get all the information you need by buying my book, An Insider Guide To Car Finance or use me to finance your next car. Happy driving.

I have been asked on many occasions about salary sacrifice schemes, whether they are available to small companies and if brokers such as I can provide them. The answer has been no and unfortunately, due to the high set up costs, look to remain so. I was at a meeting yesterday at Buckingham University at which one of the UK’s leading providers of salary sacrifice schemes were present. I asked whether the scheme would ever be available to small businesses and the answer was no, simply because of the set up costs. In case you don’t know how these schemes work you give up part of your gross income to fund a car which is considered a company car by the Revenue.

This has benefits to the employer as he saves NI on the salary sacrificed and the employee saves tax and NI on the amount sacrificed. The employee can get a new car at fleet rates deducted from gross salary with tax and NI advantages but the employee still has benefit in kind tax to pay.

This works well with those paying high tax rates taking cars with low CO2 emissions but it is a fairly complex exercise to show the net benefits, hence the high set up costs. The company that I spoke to yesterday would not entertain a customer with less than 1,000 employees.

Whilst there are suppliers who will deal with smaller customers the lease rates may not be as competitive. For the moment we certainly won’t be offering salary sacrifice but watch this space as I believe there are benefits if someone can come up with a computer system that combines salary sacrifice online documentation with a major provider of contract hire enabling SME’s and their employees to benefit. By Graham Hill

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4 Responses to “The Limitations Of Salary Sacrifice Schemes”

  1. Nick Davies Says:

    Hi Graham,

    I am a tax adviser specialising in employee reward. Please drop me an email – I might be able to assist.



  2. andy leech Says:

    Hi Graham,

    Your comments on technology, online documentation etc are spot on. My company Fleet Evolution has implemented a number of schemes in smaller companies (some as small as 40 employees) precisely with this approach and without set up costs. We have a unique background, yes we are a competitive lease company but our people have a background in HR, software and flex benefits which makes us and our methodology quite unique. We also work with brokers to introduce this to their customers on an introducer basis so brokers and their customers can have this valuable service as part of their portfolio


  3. Says:

    Hi Andy, Thanks for the note. I am director on the board of the National Association of Commercial Finance Brokers (NACFB), responsible for vehicle finance. We should discuss this proposition as it would seem that many small businesses would like to have the salary sacrifice benefits. Please drop me a note.

  4. Says:

    Hi Nick, Please drop me a note at, we may be able to develop a product for small businesses. Graham

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