Try to think of business JOURNEYS rather than business VEHICLES and you wont go far wrong.
Lets rewind a touch.
Business needs transport to function. Delivery drops, bank runs, client visits – you name it, business needs it. Without vehicles and transport businesses simply cannot function.
How to facilitate these journeys? The most simple way of course is to provide a company vehicle. You are in control of the asset, the cost, the maintenance – it seems like the most logical solution and indeed it works almost across the board.
But perhaps your one of the many businesses that allows employees to use their own vehicles to drive for work? These drivers and vehicles are commonly known as the “grey fleet”.
After all its cheaper right? You don’t have all the admin. The driver can source, fund and maintain it themselves. No insurance to sort, no accidents to deal with. Much easier and cleaner than a company vehicle right? Erm, no. Well not really.
Sometimes this can work well, most commonly for occasion users, for the odd business meeting, training day or post office run, but in the main and if not done correctly, this is fraught with risk and potentially higher costs. Thats not to say its always a bad idea but generally its a wolf dressed in sheep’s clothing. Here are some things to consider when allowing your staff to use their own vehicle for work.
Driving for Work (The BUSINESS mile)
Firstly what is a work journey or business mile? Well I heard a great explanation a few years back and Im sticking to it. “A journey that would not have taken place if not at the behest of the business is a business mile.” So – ask yourself – would that driver have made the journey of his/her own volition if not for a business purpose. If not then it comes under scope for HMRC and H&S and is a journey that the business is responsible for. So, that includes everything from a 300 yard drive to the post office through to a longer motorway journey. This does not include commuting to a regular place of business or premises. (There is some minutia on this topic – feel free to ask me and Ill try to answer)
Types of drivers/users
So its important to know that this isn’t just exclusive to essential users i.e. people who drive all the time for work and might receive a car allowance or expenses. It includes all your staff, part time/full-time/agents – anyone who is making a business trip using their own vehicles.
Licences, driver management and training
We have been working with a client recently who has a large 400+ grey fleet – all using their own vehicles for business trips and sometimes even carrying passengers. A few years ago they, well – the MD, was actually prosecuted for permitting a journey of a grey fleet driver, carrying a passenger, who didn’t have a licence. The business wasn’t aware this was their responsibility to make sure that the driver was licenced and competent. Unfortunately neither did they know that the vehicle had 3 bald tyres and wasn’t insured either. Remember, even though its their vehicle they are your driver conducting your journey.
What vehicle would you like them to drive when representing the business? Is a 1972 E type Jaguar OK? How about a pink Subaru Impreza or a brand new convertible Smart car? Maybe a Mercedes Sport Estate is a bit flash for your sales execs to visit clients in? You need to consider this when you give a cash allowance or permit use of a private vehicle. How does the vehicle reflect on the business and also, from a compliance point of view, is it fit for purpose and suitable for the usage? Consider a grey fleet application process and have a rule set before you allow a vehicle on to your fleet.
Maintained and road legal?
If you run company vehicles in your business then you already know how challenging it can be to keep accurate records, manage key dates and get drivers to co-operate. Now imagine how much more difficult this task is made when you don’t actually own or control the asset! You need to make sure that the vehicles are serviced, taxed, MOT’d and insured for business use. Not just once, forever…
This is a potential banana skin for many businesses and can become somewhat of a stealth cost if you don’t keep an eye on it. Ill give you an example from one of our own clients. Company X hired a company trainer and gave them permission to use their own vehicle and claim business mileage expenses. The rate of reimbursement was, as per the AMAP rates – see below, at 45 pence per miles for the first 10,000 miles and 25ppm thereafter.
In a 12 months period the driver drove over 18000 business miles. Their total reimbursement for the year was £6500! A strong argument for a company vehicle perhaps? (Councils and education authorities suffer this greatly).
TIP – It might be easier and cheaper to give the grey fleet driver a company fuel card and you charge them for personal miles rather than reimbursing for business… Or maybe a company vehicle too? But either way be sure your journey logs are accurate.
Its important for HMRC, vat reclaim, purposes that you know which are business and personal miles of course but also how can you be sure that your drivers are being honest with you? You can use paper records sure but its generally accepted that businesses pay out more than 15-20% than actual driven miles which can really add up. Consider an GPS or telematics device to ensure not only accuracy but reduced admin for your drivers too.
Opt out or cash allowance schemes
It is possible to operate a low risk, cost controlled cash allowance scheme but be sure to consult with professionals before you implement. Some funders will also consider vehicle salary sacrifice schemes that work much the same way as the well known Bike 2 Work program. But the thing to know is that there are clever ways to give cash allowances but also remaining in control of all the pitfalls mentioned above but it needs to be well thought out, usage driven and strongly considered and can never be as simple as throwing £400 a month at a driver and just letting it happen. Id always lean towards a company vehicle but if theres a business case to offer cash then so be it.
If you would like to discuss any of the above with me directly feel free to drop me a line or even better lets get a conversation going on Linkedin for everyones benefit.
Reduce costs, reduce risks, reduce admin.