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What is a cash opt-out scheme?

With company car drivers becoming increasingly aware of their tax position and employers coming under pressure to offer flexible benefits to attract and retain the best staff whilst balancing costs, cash opt-out schemes are growing in popularity.

Within the Listers Group we see, on average, 6,000 employees per year walking into our sites having been given the cash option but not truly understanding what their cash will buy, the potential tax benefits and importantly the responsibility they are taking on.

The Business Solutions team was created after Listers identified a need to support the company who has allowed their employee to walk into one of our sites by offering a service that ensures their duty of care responsibilities are met, but also supports the employee in making an informed decision about all aspects of car ownership and control.

How they work

The employer gives a cash sum to the employee – supplemented by the savings the employee makes – to purchase their own car. Authorised mileage allowance payments are then made to the employee according to business mileage.

Advantages to using cash opt-out schemes include:

  • The removal of benefit in kind tax implications
  • Putting the employee into a financially neutral position
  • Making the employer exempt from making National Insurance Contributions on the car
  • Giving tax relief on approved mileage rates via AMAP
  • Ensuring that choice of vehicle not limited by BIK taxation

Generally speaking, however, cash opt-out schemes are traditionally hampered by:

  • Low rates of employee take-up
  • Cost and risk involved in launching schemes
  • Driver mileage returns vital
  • A higher than expected cost of driver support
  • Increased interest from HM Revenue and Customs in ensuring schemes are compliant

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