Ditching company cars for cash allowances comes with risks

Vehicle and asset finance specialist Maxxia Group, are advising UK businesses that ditching company cars in favour of cash allowances for perk drivers is not without its risks from cost and duty of care issues.

The company says it is holding increasing numbers of conversations with businesses which are looking at the implications of ditching perk cars and only retaining essential user vehicles.

The change of direction comes following adverse publicity and rising tax costs for company cars, especially diesels, announced at last autumn’s Budget.

Now, many businesses want to explore the option of providing perk drivers with cash allowances instead of cars, but often without thinking through the consequences of cutting perk users adrift from the main company car scheme, it is claimed.

Maxxia said it was advising businesses that there were three main areas of risk from taking such action:
• The increased costs to employees, which many businesses did not appreciate;
• Employers facing higher mileage reimbursement costs under Approved Mileage Allowance Payment rates of 45p per mile for the first 10,000 miles and 25p thereafter rather than utilising lower Advisory Fuel Rates;
• Employer duty of care would increase for what could potentially be a large ‘grey fleet’ created by increased cash allowance vehicles.

Gordon Calder-Jones, Maxxia director, said: “Due to recent adverse publicity and government intervention, we are seeing increasing numbers of businesses thinking of ditching perk cars, often for quite senior employees, without fully considering the consequences. Businesses really need to engage with their advisors and seek expert guidance before they contemplate making wholesale changes of this nature.”