How to offer home chargers with salary sacrifice
Salary sacrifice and home chargers
An employee joining an electric car salary sacrifice scheme will want, in most cases, a home charger so they can charge the car’s battery at their own convenience, writes Rhys Whitcombe of BCF Wessex (left).
But as more employees join salary sacrifice schemes, how the home charger is funded becomes ever more important.
BCF Wessex has been asked several questions regarding home chargers in the last few months. The enquiries mostly centre around salary sacrifice and whether a home charger can be included in the employee’s gross salary sacrifice, thereby unlocking income tax and National Insurance Contributions (NIC) savings on the cost of the home charger and its installation.
Currently, providers use different methods to supply home chargers to salary sacrifice scheme participants.
Some give them away for free; others ask employees to pay in full upfront once the agreement begins, but including them within the salary sacrifice agreement isn’t that popular – yet.
Including the cost of the home charger in the gross salary sacrifice and securing income tax and NIC relief is possible, but there are hurdles to ensure it’s above board and there are no adverse regulatory issues lurking in the background.
At the end of the salary sacrifice agreement, having paid for the charger attached to their house, the employee would expect to retain ownership in most cases.
The scheme provider therefore, needs to facilitate a way for this to happen which doesn’t fall foul of consumer credit regulation and doesn’t cost themselves or the employee any additional costs or cause any unnecessary headaches.
Whilst the current methods are fit for purpose, they’re not necessarily the most cost-effective or commercially viable.
A free home charger is ideal for an employee. They get the charger with their car and only have to pay if the installation on their property isn’t standard.
The downside for the provider is the cost. According to a recent article by Checkatrade, the standard installation cost for a home charger is roughly £1,000.
Multiply that by several hundreds and the scheme provider is facing a substantial bill.
On the other hand, asking the employee to pay upfront for the charger represents an unforeseen cost. This doesn’t sit well with one of the unique selling points of salary sacrifice: that there are no large upfront payments, and the potential income tax and NIC savings are foregone too.
Recently, BCF Wessex has supported a customer to implement a novel approach to funding, which some of our clients have also identified as a potential means of providing home chargers via salary sacrifice, thereby spreading the cost and securing the income tax and NIC savings.
Based on specialist consumer finance-related legal advice regarding the home charger provision within salary sacrifice, as well as avoiding consumer credit regulation, the issues to consider include:
the transfer of ownership to the employee at the end of the salary sacrifice agreement, without there being an obligation to purchase;
how to manage and pay for early termination;
how to charge removal costs if the employee decides not to buy the home charger at the end of their salary sacrifice agreement and
how to embed the provision of the home charger within the salary sacrifice agreement itself in order to keep the paperwork as simple as possible to ensure there is no ambiguity regarding the regulation of the agreement.
Overall, the construction of the legal, and the tax arguments supporting the income tax and NIC relief are complex, but restructuring a salary sacrifice agreement to facilitate the procurement of a home charger is pretty straightforward.
Hopefully this article gives a flavour of the issues involved and outlines the complexities to be overcome.
But to learn more about how to put this into practice, please contact us at BCF Wessex. We can advise you on how best to structure the agreements as well as confirm why the provision of home chargers via salary sacrifice will qualify for income tax and NIC relief.
This article was originally posted on March 14th 2023 on Broker News.
