Contract-hire, leasing and fleet manager Ogilvie Fleet said it has seen huge growth in demand for Personal Contract Hire (PCH) from drivers giving up company cars, as well as from the wider employee community across its customer base.
Ogilvie Fleet has more than 18,500 vehicles on lease and under fleet management including company cars and vans and models funded via salary sacrifice and PCH schemes offered by customers to their employees.
Since launching a PCH solution last year, Ogilvie Fleet has introduced it at 26 businesses collectively employing almost 150,000 employees. Meanwhile, salary sacrifice schemes are operated by 30 clients.
Both vehicle solutions are offered under the company’s ‘Happy Drivers’ brand alongside company cars and vans.
Richard Jessop, head of salary sacrifice, who has lead both the Ogilvie PCH product and salary sacrifice at Ogilvie Fleet, said year-on-year increases in company car benefit-in-kind tax coupled with uncertainty surrounding what the tax regime would look like from April 2020 pending a government announcement expected later this year, was driving demand.
Jessop said: “The general trend is for our corporate customers to offer perk company car drivers a cash allowance option. Ogilvie Fleet can meet the vehicle demands of those drivers by offering a PCH solution, which removes the benefit-in-kind tax burden for them and also provides them with a reputable source for cars. Equally employers have no contractual risk in employees opting to fund a car through a PCH agreement with a known company with which they already have a business relationship.
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“Simultaneously, Ogilvie Fleet is witnessing many employers extend the benefit of a PCH solution to their entire workforce who do not qualify for a company car by virtue of their job. That is proving to be a significant growth opportunity because invariably a business has more employees than just those opting for a cash allowance instead of vehicle.”
Demand for PCH witnessed by Ogilvie Fleet is supported by latest data from the British Vehicle Rental and Leasing Association, which shows that last year PCH accounted for 68% of all new leasing broker car contracts and across the Association’s membership as a whole personal contracts saw the highest level of growth at 14%, accounting for nearly 1.9m vehicles.
Meanwhile, said Mr Jessop: “Salary sacrifice remains a key solution in Ogilvie Fleet’s product portfolio with many customers offering ‘perk drivers’ the option of a company car, salary sacrifice or PCH.”
2017 rule change
Rules were introduced in April 2017 for car salary sacrifice schemes and car or cash allowance programmes known as Optional Remuneration Arrangements (OpRA). The haste with which the rules were implemented led to anomalies being subsequently corrected with effect from April 2019. They:
- Ensure that when a taxable car or van is provided through OpRA, the amount foregone, which is taken into account in working out the amount reportable for tax and National Insurance contributions purposes, includes costs connected with a car or van, such as insurance, which are regarded as part of the company car tax benefit-in-kind under ‘normal rules’
- Adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the tax year.
Jessop said: “Prior to OpRA we expected salary sacrifice demand to be huge. However, the perceived complexity around the rules means that by comparison PCH is seen by many employers and employees as straightforward to understand, simple to administer and generally a breath of fresh air.
Employees opting for a car via PCH are choosing a wide range of makes and models with some opting for the “cheapest car available on finance” and others opting for performance vehicles.
Jessop said: “The marketplace continues to evolve and employers want to offer their employees a broad range of vehicle solutions as part of an overall flexible benefits package. Other innovative funding solutions will, I believe, be developed that enable vehicle leasing providers such as Ogilvie Fleet to deliver car solutions that negate the requirement for ‘perk’ drivers to pay benefit-in-kind tax as it becomes ever-more costly.”