Car allowance query

Harry321

Folks

I currently have been asked to opt out of a company car scheme. They are offering €700/month allowance which equates to €336/month net. On top of that they will pay for fuel consumed for company business. They are not offering a flat mileage rate

I will be doing between 20 and 25000 miles per annum. Doing the maths what they are offering will not cover my costs especially I now have to go and purchase a car with a reasonable spec for both relialbility and professional image perspectives

What are your thoughts, mine are that I am entitled to a flat mileage rate on top of the car allowance and if this means paying for the fule myself , it will still work out alot better

Can someone offer me a valued perspective please as I need to act on thi asap

Thanks

Greenmachine

What about a lease car with the optional balloon payment on the end. If you choose your own car you can pick one with good fuel economy, lower tax band etc. How are they paying for your fuel under the new scheme are they giving you a fuel card etc.
If I remember correctly isn't Benefit in Kind for a work car based on the forecasted depreciation of the car. A 2 year old car for example would attract less tax than a brand new car.

Harry321

Thanks for your reply

I would pay for the fuel with my company credit card

I would not be paying BIK as this would be my private car but the car allowance is subjected to 52% tax which leaves me with €336 / month to finance a car, pay for insurance, tyres, service, maintenance e.t.c

To be honest if they ar enot going to pay a mileage rate then the car allowance would need to be doubled to €1400/month in order to allow me to cover my cost base , based on the mileage I will be doing

vandriver

Civil service rates for 25k miles would be 13k tax free.Take away approx 4k fuel cost leaves 9k a year that the revenue accept is needed to run a car.(near enough your own estimate of 1400 a month less tax)

vandriver

Why not suggest that they pay you say civil service rates or slightly less,and you will pay your own fuel?

Harry321

Yes that's in my head , i think you are in agreement with me that what they are offering at moment is not near enough based on mileage that I will be doing and type of car (Mondeo class) that I need to purchase

Now I need to structure soemthing together to convince my employers

helimachoptor

can you not refuse to opt out?
at that mileage you wouldnt be paying much in BIK

Bray Header

Professional image perspective is a misnomer in my opinion.


I drive a really nice car. There's no way I'd drive it to a customer though. I work in sales, and use a 2006 passat diesel for motorway mileage, and pulling up outside customers premises. Your customer will not appreciate you pulling up in a car that he/she perceives they are paying for

You should pick up a decent motorway cruiser for 2/3/4 k?

vandriver

How about asking for CS rates,with you paying fuel,and offer a cap of 1k a month?
This would be the same as they seem happy to pay now,but you would get the full amount tax free.As you are saving BIK,you could offer a slightly lower cap and still be fine.

Just pondering...this won't save the company any cash over leasing the car themselves,are they pushing the finance raising onto you because of any financial difficulties?

timetogo

From my dodgy calculations

They pay for the fuel.
+ give you €336 per month after tax (or €4032 after tax).

The civil service rate (assuming the car is over 1.5L) is
.3912 per KM for the first 6437KM
Then .2122 for every KM over that.

So if you travelled 25000KM per year and paid for the fuel yourself and got the civil service rates you'd get €6457 but you'd have paid for the fuel yourself out of that.

The option they're offering you looks better.

Edit: Ah fek. I used the wrong rates. The rates for a 1.5L are 59.07c up to 6437KM
& 28.46c on every KM over that.

So instead of €6457 it should be €9085.

vandriver

Those aren't the cs rates I've found online!Are you sure theyre right?Also OP quotes 20-25 k MILES per year.

wexie

vandriver wrote: »

Those aren't the cs rates I've found online!Are you sure theyre right?Also OP quotes 20-25 k MILES per year.

From here : http://www.revenue.ie/en/tax/it/leaflets/it51.html

Engine Capacity: 1,501 cc and over
Up to 6,437km 59.07 cent
6,438km and over 28.46 cent

the rates quoted are for a car UP to 1.2l.

(although strange the rates haven't been adjusted since 2009, I looked but can't find anything newer)

If it helps, I'm in much the same situation and opted for the fuel card ("reasonable personal use allowed") I used to get mileage but then someone pointed out that you can only claim from your employers 'normal place of business' which I'm nearly 100 miles away from. As I had been managed from the UK previously nobody had ever told me before.

So the way I see it, it all depends quite on how they see your fuel useage and which miles you'd be allowed claim.

timetogo

wexie wrote: »

So the way I see it, it all depends quite on how they see your fuel useage and which miles you'd be allowed claim.

That's a good point too. Travelling to / from your office doesn't count as fuel you can claim for on the civil service rates. Not such a big issue if you live close to the office.

vandriver

As the op mentioned a reasonable professional looking car ,I used the 1.5l and up table.

Harry321

Thanks all. I am home based which is here in Roscommon and I travel all around the country , however my contract states



"Your normal place of work is the company's premises at Limerick or at your home."

I think from an audit persective, if I were to expense from home, I would be okay as per wording in my contract?

wexie

Harry321 wrote: »

Thanks all. I am home based which is here in Roscommon and I travel all around the country , however my contract states



"Your normal place of work is the company's premises at Limerick or at your home."

I think from an audit persective, if I were to expense from home, I would be okay as per wording in my contract?

I wouldn't want to rely on that, from the revenue website (http://www.revenue.ie/en/tax/it/leaflets/it51.html):

Normal place of work

The “normal place of work” is the place where the employee normally performs the duties of his/her employment. In most cases, this should not give rise to difficulty.

The employer’s business premises will be regarded as the normal place of work for an employee where:

travel is an integral part of the job involving daily appointments with customers; or the duties of the employment are performed at the various premises of the employer’s customers but substantive duties are also performed at the employer’s business premises.
An employee’s home would not be regarded as the normal place of work unless there is an objective requirement that the duties of the office or employment must be performed at home. It is not sufficient for an employee merely to carry out some of the duties at home.

Usually, the employer will provide the facilities necessary for the work to be performed at the business premises. Even where an employee has to do some work at home or to keep some equipment at home, the place where he/she resides is a matter of personal choice and it would not be regarded as a place of work.

I queried it with revenue as I thought the same as you, I live in Wexford and employer's normal place of business is in Dublin. Almost never in the office and when not on the road work from home. Revenue's reply was pretty much 'tough ****'.....

EDIT : as an afterthought, I did however, claim miles to and from front door for about 3 years and was never told it wasn't okay (that's how they do it in the UK) until I got a manager in Ireland who picked up on it. So there's every chance you 'may' get away with it....

Harry321

so effectively, I may have to expense from Limerick, if needs be so be it

I was doing a quick calc there and based on 40km per year, using civil service criterion, i could expense €13600 tax free. definitely better than car allowance option . However if I take cost of fuel out of that (approx €5k for 40000km), this leaves me with €8600 to cover all other expenses


the car allowance is only leaving €4200 net to cover all other expenses

Lets assume I were to but a brand new car to be financed @ €500/month. Would I would I be justified as using that as a cost in my effort to negotiate a better deal here. i.e this is what I am calculating at moment.

have a look at the atatched spreadsheet and let me know if it is flawed

timetogo

From http://www.revenue.ie/en/tax/it/leaflets/it51.html

Business Travel involving travel directly to/from home

Where an employee proceeds on a business journey directly from home to a temporary place of work (rather than commencing that business journey from his/her normal place of work) or returns home directly, the business kilometres should be calculated by reference to the lesser of -

the distance between home and the temporary place of work; or
the distance between the normal place of work and the temporary place of work.

So if you're in Roscommon and you're travelling to a customer beside your office in Limerick then you're screwed, but that's probably not the norm.

trad

This might be of some help

http://www.mileagesheet.ie/

Harry321

vandriver wrote: »

How about asking for CS rates,with you paying fuel,and offer a cap of 1k a month?
This would be the same as they seem happy to pay now,but you would get the full amount tax free.As you are saving BIK,you could offer a slightly lower cap and still be fine.

Just pondering...this won't save the company any cash over leasing the car themselves,are they pushing the finance raising onto you because of any financial difficulties?

Vandriver, just reading this now as a flurry of psots came into together, i like this idea as it is in theory same difference from company balance sheet perspective. I don't believe there are any difficulties from a financila perpsective, what they are saying it is currently an admistrative headache but I am a bit cynical about that.

In terms of expensing that, how would that work on a monthly basis as there are two differnt CS mileages rates. Would I on a mothly basi, expense the first 536 miles (6437/12) at higher CS rate and balance at lower rate?

vandriver

As you described,536 km at the higher rate per month and balance at lower rate.

Harry321

Thanks Vandriver

Would you mind takinga quick look at my speadsheet from an earlier post on this thread. I am trying to use this a sjustifcation for what they are offering is not enough and wht=y the CS rates woould be enough

My concern wityh my approach is that I have both a car finance cost input and a depercation cost input into the calculations , is this double accounting?

vandriver

Ok,on my phone so this might look terrible!
Yearly cost based on a mondeo zetec diesel (27 k new) over 5 years

Tax 390
Depreciation 4000
Interest 800
Insurance 1000
Nct 18
Tyres 600
Service 800
Repairs 1000 (may be near the end of the 5 years)
Fuel 3375

Total per year 11983

Hope this helps.
Assumptions 50 mpg,5 year old mondeo 200 k km value 7k
New clutch dmf,timing belt,and 2 grand for suspension brakes etc
2 main dealer services per year with replacement car

Harry321

Thanks van driver, not a million miles from my end result in germs of cost/annum!

vandriver

Your figures had some errors (mixing monthly and annual costs,including loan repayment)

Harry321

vandriver wrote: »

Your figures had some errors (mixing monthly and annual costs,including loan repayment)

vandriver

One more question, in your opinion is it reasonable that a company should contribute towards the capital cost of a car, i.e should the car allowance cover this contribution as well as the standing and running costs

I ask this because I estimate that I will be only using the car 90:10 (business:private) in terms of km travelled per year

vandriver

The depreciation figure I included is representative of your loss of capital,which is the same thing over the life of the car.
In my example I estimated that a Mondeo 2.0 d Zetec would lose 20 k over 5 years (27k to 7K).If you claim 4k per year as depreciation then your company has contributed 20 k of your cars capital cost,and you still have a car worth 7 k.
Obviously you can tweak the figures to exclude weekend mileage (but if you're doing that much business travel,will you want to drive at the weekend!)

JustAThought

Here's a few points .

Your company will have worked out the best deal for them - not for you. Opting out will not make you a winner.

They will save on - ie you will now have to pay for - extra Service, parts, work, tyres, Breakdown costs and replacement hire, etc

Your insurance little print - check it out. Mine is for personal use only and is invalid if I use the car for commercial or travelling salesman use. Any accident - no insurance, or you will have to take out commercial - and much more expensive - insurance.

If for any reason your car is off the road you will have to pay the replacement ( insurance covers 3- 5 days only) or you wil loose pay/ days work.

If some idiot puts your car off the road ( hit & run, or more common no tax & insurance) you will have no-one to sue & will have to wait months to try & get recompense to get your car fixed from the redress board people. This happened my friend - 1 year on & they are still waiting - their car was a write off.

If you have an accident, while driving, more time on the road the greater odds, it will be your insurance & no-claims bonus not theirs.

As your car depreciates you will take the hit - they can write this off against tax- you can't. You will have to replace your car sooner & do more maintenance/ replace more parts, more mileage depreciates value for resale etc

You can expect to be taxed on BIK on it .

I cannot believe that they shamelessly declare that they will pay no mileage. wTF????? It's a basic - like not providing water to flush in the toilet.

This represents a great deal for them & dreadful one for you. Don't entertain it. Don't argue with them. Just send them an email declining to opt out if the current system. & leave it at that.

Btw - the reason they are " offering" it to you is that it constitutes a fundamental change in your terms & conditions & work practices and they cannot make you do it. They know this , so they are " offering" it to you. Email briefly - don't get into arguments with them - shut it down & let them try some other poor muppet - just don't let it be you . Terrible idea - for you.

road_high

JustAThought wrote: »

Here's a few points .

Your company will have worked out the best deal for them - not for you. Opting out will not make you a winner.

They will save on - ie you will now have to pay for - extra Service, parts, work, tyres, Breakdown costs and replacement hire, etc

Your insurance little print - check it out. Mine is for personal use only and is invalid if I use the car for commercial or travelling salesman use. Any accident - no insurance, or you will have to take out commercial - and much more expensive - insurance.

If for any reason your car is off the road you will have to pay the replacement ( insurance covers 3- 5 days only) or you wil loose pay/ days work.

If some idiot puts your car off the road ( hit & run, or more common no tax & insurance) you will have no-one to sue & will have to wait months to try & get recompense to get your car fixed from the redress board people. This happened my friend - 1 year on & they are still waiting - their car was a write off.

If you have an accident, while driving, more time on the road the greater odds, it will be your insurance & no-claims bonus not theirs.

As your car depreciates you will take the hit - they can write this off against tax- you can't. You will have to replace your car sooner & do more maintenance/ replace more parts, more mileage depreciates value for resale etc

You can expect to be taxed on BIK on it .

I cannot believe that they shamelessly declare that they will pay no mileage. wTF????? It's a basic - like not providing water to flush in the toilet.

This represents a great deal for them & dreadful one for you. Don't entertain it. Don't argue with them. Just send them an email declining to opt out if the current system. & leave it at that.

Btw - the reason they are " offering" it to you is that it constitutes a fundamental change in your terms & conditions & work practices and they cannot make you do it. They know this , so they are " offering" it to you. Email briefly - don't get into arguments with them - shut it down & let them try some other poor muppet - just don't let it be you . Terrible idea - for you.

Couldn't agree with this more. Have a co car too for work and if they ever tried to pull something like this I'd be out of there...it's akin to a big paycut really.