Company car eligibility - Energy Saving Trust



Organisation X’sFleet Vehicle PolicyVersion106 March 2019Document Owner[Organisation X]Review Date[January 2020]Notes on using this document, provided by the Energy Saving Trust:This template is designed to assist a fleet manager in developing or updating fleet policies. This document provides guidelines on what should be included in each section of a fleet/vehicle policy, and example wording for some sections.Replace ‘Org X’ with your organisation’s name throughoutAdapt this template to suit your needs. Sections which are very likely to vary between organisations are highlighted in yellow.Please remember that it may not be exhaustive for your situation.Vehicle Policy – template and guidelinesA Vehicle Policy sets out the conditions under which company-owned vehicles are allocated. There may be different polices for drivers for whom having a vehicle is essential to their job and for ‘perk car’ drivers. This document provides guidelines on what should be included in each section, and suggests appropriate wording for some pany car eligibilityThis section of the policy should: Define the criteria that determine eligibility for a company vehicle, such as grade or job requirements.Indicate who a driver should approach if they think their entitlement is incorrect or the policy is being applied inconsistently. Identify restrictions that may be prudent or mandated under the insurance terms. For example, prohibiting racing, off-road use or business use other companies.State the circumstances where staff will be expected to accept a reallocated vehicle.Set out the conditions under which a driver can return the vehicle and leave the scheme. Define what happens to a driver’s vehicle entitlement if they are promoted, demoted or change role.State the conditions under which car entitlement can be withdrawn. This should be consistent with the employee’s conditions of employment.Describe how maternity leave, parental leave, long-term sickness, redundancy and unpaid leave affect company car eligibility. HR should have a policy in place that sets out how benefits and remuneration are affected in the above circumstances. In addition, you should:Confirm that drivers must have the appropriate licence for the vehicle they are driving. Make it clear that drivers must inform the company if they receive penalty points or have the licence withdrawn. You should state the consequences for drivers if they are deemed ‘high risk’, i.e. 6 or more points, or involved in multiple incidents.State the company’s position regarding holders of non-UK driving licences, and if any training is required to familiarise them with UK driving. State whether provisional licence holders are entitled to drive if accompanied by a full licence holderBe clear if additional drivers are allowed, and any conditions imposed on additional drivers, such as a minimum age or level of driving experience.Eligibility - Example policy wordingEligible employees will receive either a company car for use during employment with Org X, subject to vehicle licence check and completion of satisfactory risk assessment. To be eligible for a car, the employee must hold a valid full UK driving licence and be over 21 years of age. If an employee changes role and is no longer entitled to a company car, they must return the car to Org X.The car provided is determined by an employee’s grade and experience level. A company car must be retained for the duration of the contract term/contracted mileage.Ordering a VehicleThis section should cover: Restrictions on choice. Some ‘essential’ company vehicles drivers may be allocated a van with no choice of model or specification. For others, a vehicle choice list will define the vehicles available. Trading up and down. Some companies allow employees to contribute cash to receive a better vehicle, and vice versa. If so, state the benefit-in-kind calculation and the impact on National Insurance payments.Optional Extras and dealer Fitted Accessories - set out the company’s position on fitting and paying for optional extras or dealer fitted accessories and how this fits with any trade up or down policy.Car Level - Example policy wordingThe level of the car and leasing criteria is determined by an employee’s grade and how many years they have held a valid driving licence. Drivers with less than two years driving experience after passing their driving test are required to take a car with an engine power of no more than 100bhp (or electric equivalent). The company car choice list is available on the intranet. Two-seat sports cars and convertibles are excluded, except where express written permission has been given by the Chief Executive, and duty of care and insurance cover can be readily satisfied.Drivers must not modify vehicles in any way. NB some organisations may allow the fixing of t a towbarVehicle choices are reviewed periodically, at the organisation’s discretion. Trade Up / Down - Example policy wordingEmployee can choose a car from one grade below their entitlement and will receive a fixed monthly trade down payment for taking this option. The value of this trade down is shown on the intranet/car scheme portal. Employees can make a personal use contribution to add accessories to their car. The maximum value of these contributions is capped for each employee car grade, see the company car portal. All accessories added must be paid for in advance of the car being delivered and there will be no reimbursement to the employee in the event of the employee leaving the business or the vehicle no longer being available (e.g. stolen or written off in an accident). In order to ensure that all company cars continue to adhere to Org X’s objectives (image, environmental, reallocation etc.) there are restrictions on the type of accessories that can be added [provide details]. Ordering a new company car - Example policy wordingAll company car drivers have access to Org X Car Portal/intranet etc, where employees can view the car choice list and submit their order. Cars on the choice list are subject to change dependent on availability and agreements with our preferred suppliers. Employees are required to order a vehicle at least 3 months before their renewal date or in the case of a first company car, within 1 month of them receiving this benefit. As part of the ordering process, employees are required to have their licence details checked and complete a risk assessment via [in-house system or external supplier]. If this is an employee’s first car, a pre-contract car may be supplied to them as soon as a new vehicle has been ordered. Org X will organise this for the employee. Each order will be progressed regularly by the Purchasing team and an employee will be kept informed on delivery information.Return of Company Vehicles:In this section, define: what is considered as an acceptable condition for company vehicles to be returned in, both mechanically and visually. the consequences for drivers that don’t return vehicles in an acceptable condition Definitions should take account of their use, mileage and age. Purchase of a Company VehicleIn this section, outline if Org X will allow the purchase of a company vehicle in any of the following circumstances:Death in serviceEmployee leaving the companyPurchase at the end of its allocation period.If drivers are entitled to buy vehicles, describe the basis for the vehicle valuation. TaxationWhere a company car or van is made available to an employee for private use, this normally gives rise to a Benefit-in-Kind charge. This section should provide sufficient information for the employee to understand the potential BIK charge and to be able to factor this into choice of vehicle, if there is a choice.Please note that the tax treatment for partnerships and sole-traders is different, and advice should be sought. Proposed tax changes from 2020/21 will mean that drivers of ultra-low emission vehicles should also consider the distance their vehicle can travel at zero emissions because this will affect the BIK taxFor help, see the Energy Saving Trust Company cars: A guide for drivers and employers.It should also explain the tax implications of trading up and down, and private fuel benefit, if provided. Please note that EST does not recommend offering ‘free’ private fuel as it often results in very high costs for both employers and employees.Taxation of company cars – Example policy wording – For guidance onlyEmployees with company cars that are made available for private use are taxed on this benefit through the PAYE system, on a cash equivalent basis. The tax due depends upon the P11D value of the car and its CO2 emissions. The benefit-in-kind rate for a company car is a percentage (linked to CO2 emission) of the “price” (the P11d value) of the car. The “price” of the car is defined as the manufacturer’s list price and includes VAT, optional fitted extras and any delivery charges. Drivers of lower emission cars therefore pay less company car tax.Staff seeking clarification should consult [individual/team/supplier].Org X submits this information by 6th July each year for inclusion on an employee’s P11D. The information submitted relates from 1st April of the previous year to the 1st April of the current year. If an employee changes car during the tax year, the tax will be levied proportionately on each car based on the number of days that each car was in their possession. Org X reports any vehicle that has been made available to an employee for private use for more than [five days or more]. Usually cars which are driven for shorter periods are not reported. However, in some circumstances these cars will be reported to HMRC. Please note that although Org X will advise HMRC of any changes to an employee’s company car annually, it is the employee’s responsibility to ensure that they inform the tax office if they join or leave the company car scheme, or change their company vehicle. When receiving their first company car, employees can inform the HMRC of the car details either by phone, letter, or online. Appendix 1 gives an example of a suggested letter. Taxation on vans Where a van is solely available for business travel, including commuting from home to work, the driver may not be subject to a benefit-in-kind tax charge. Obtaining a declaration to this effect from the driver will reduce tax and national insurance contributions. If the van is available for private use, this is likely to give rise to a benefit-in-kind tax charge.Driver responsibilitiesTypical expectations for company car drivers include: Comply with all road traffic laws, speed limits and regulations at all timesSafe and considerate drivingUndertake regular checks of tyre pressure, fluid levels and operation of lights Ensure vehicle is serviced in line with manufacturer recommendations & MOT requirementsKeep spare keys safeInform the company of any accident or damage to the vehicle within 1 working dayEnsure vehicle is always clean and tidyInform the company of any illness that may affect driving abilityEnsure that glasses or contact lenses are worn if requiredTake a minimum of a 15 min break from driving at least every two hoursReturn the car in a clean condition that reflects fair wear and tearEnsure only authorised drivers use the vehiclePay any fines and fixed penaltiesAdhere to all other areas of company policy e.g. use of mobile phones Company cars – Additional considerationsInsurance for company carsIn this section, you should:Define any conditions imposed by the insurer, or for a self-insured fleet, the policies that control risk.State the excess that you expect the driver to pay and under what conditions. For example, is an excess expected if the vehicle was damaged as a result of business use? State if there is an additional excess for Additional Drivers and repeat offenders, or if the driver’s excess increases with the number of claims.Maintenance This section of the policy should: Describe the organisation’s policy for maintaining vehicles (i.e. tyres, glass), including where drivers should take their vehicles, payment methods, and any prior authorisation processConsider out of hours support, servicing, MOTs and manufacturer recallsAccidents & BreakdownsIn this section, describe how the company manages accidents both during and outside of office hours and also consider how to deal with thefts of and from vehicles.Replacement VehiclesIn this section, it is useful to cover:the company’s policy regarding replacement vehicles i.e. those that are allocated to staff because their allocated car is not available, typically due to accident or breakdown. how drivers arrange this and their entitlement(s)the sign-off procedure.Overseas TravelIn this section, cover:If overseas travel is allowed, for both essential car user and perk car drivers.Describe what documentation is required and how this can be obtained e.g. VE103. The policy for the purchase of fuel abroad and how this may be pany car cash allowance (Opt Out)If there is the option for employees to opt-out of the company can scheme, this section should: State the cash amount available at each grade and whether this is available to both perk and essential users.State any conditions attached to the cash allowance. For example, there may be a restriction on the maximum age and mileage of the car being purchased.Describe what happens in circumstances such as maternity leave and long term sicknessState if staff can re-join the company car scheme if they wishDescribe how business mileage is reimbursed and the rates.State whether cash-takers are eligible for ‘free’ private fuel and explain tax consequences Describe policy for business travel in private vehicles and whether the company will cover the cost of relief vehicles if the employee’s private car is off the road Be clear that employees that use their private car on company business abide by the conditions set out in the [Driver Handbook] and [Road Safety Policy].Cash Allowance - example policy wordingEligible employees will be provided with a taxable cash allowance, paid monthly, that they may use towards funding the purchase or lease of a vehicle. Eligibility for the Company Car Allowance is at the discretion of the company based on:job need - where there is a normal ongoing requirement to travel in excess of 8,000 business miles a year. This mileage requirement is pro-rated for part-time employees.seniority - all staff in senior management grades Level 1 to Level 4 inclusive, where it is considered an appropriate and necessary part of the remuneration package.Using private cars for business purposes The use of privately-owned cars for business purposes is also referred to as ‘grey fleet’ use. Organisations have duty of care and health and safety obligations towards all employees driving for work, regardless of vehicle ownership.Further information can be found in the EST A Guide to managing and reducing grey fleet mileage. This section should state: the circumstances when it is deemed acceptable for staff to use their own vehicles for business travelthe expectations for grey fleet drivers – likely to be very similar to company car driversthe alternatives, such as pool cars and daily rentalhow the organisation fulfils its duty of care obligations, e.g. licence and vehicle checks.Pool CarsYou may find it helpful to read the EST Pool Car Strategy, a guidance note/template which provides much more detailed information on introducing and managing pool cars. In this section: Set how who should use pool cars and whenState that pool car drivers must also adhere to the conditions in the Driver’s Handbook and road safety policy. Rental carsFor short term rental (typically 1-28 days), set out: When rental cars should be used, how drivers arrange this and sign-off processesconditions for drivers, i.e. following the road safety policy.Sometimes, there will be need to find a vehicle for temporary use (typically 29 days – 12 months). For example, a new employee may require access to a company vehicle on their first day of work, or an employee on secondment or undertaking a special project may require a vehicle. As with short-term rentals, describe in the policy how drivers should arrange this and any conditions.Fuel useIn this section of the policy: State which grades are entitled to free private fuel, if any.How staff should recover the cost of any fuel purchased for business travel. How fuel reimbursement rates are calculated for company car drivers and privately-owned car drivers.State the importance of buying low-cost fuel.Mileage reporting & reimbursementIn this section: describe the process and requirements for reporting business and private mileage.the consequences of exceeding contracted mileages.For assistance, see the Fleet Management Toolkit on the Energy Saving Trust website. Mileage – Example policy wordingContracts for each company car are adjusted to reflect an employee’s annual anticipated mileage. It is important that employees provide accurate data each month on their car mileage using the [internal/supplier] process. Employees with high mileages may be required to change into another car in order to make sure their ordered vehicle does not exceed the contracted mileage and incur additional charges.Fuel efficiency and carbon emissions considerationsThe vehicle policy is an opportunity to set out the company’s policy on fuel-efficient driving and efforts to reduce the carbon footprint of employee travel. For example, in this section, you could outline: Eco-driving techniques, such as anticipating traffic flow, shifting up gears, avoiding excessive speeds, as well as reducing vehicle weight, i.e. removing roof racks/boxesAny eco-driving training provided by the company, and how this is arranged or requestedIf and how MPGs and mileages are monitored, including any targets and the rewards/consequences for meeting these.CO2 caps on vehicle choices and when these will be reviewed and updatedIf speed limiters are fitted to any company vehicles, and why Plans to integrate ultra-low emission vehicles into the fleet.Telematics In this section of the policy, you should explain how any telematics or other tracking devices are used by the organisation and why. For example, you may want to cover the benefits of the system for the organisation, what types of information is collected and transmitted, if individual drivers are identified, and who within or outside the organisation has access to the data. You should also outline the process undertaken by fleet managers and/or line managers if any unusual behaviour or anomalies are detected by the system, and the possible consequences for the driver. For more information, see the Energy Saving Trust guide How fleets can use technology to manage driver behaviour and vehicle efficiency.Further information and fleet policesIn addition to a fleet vehicle policy, you may also consider introducing or reviewing fleet policies which cover road safety, vehicle maintenance, driver responsibilities and so on. These may be codified in a Driver’s Handbook or road safety policy.The following are offered as a starting point on road safety:HSE Driving for WorkThe Road Traffic Act 1988 and Health and Safety at Work Act 1974Highways England – Driving for better businessBrake - and ................
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