Many blue chip companies bought into the concept of cash allowances and employee car ownership (ECO) schemes that left employees cash neutral and provided savings for themselves with the axing of company cars.

Initially viewed as tax-efficient and cost-effective the reality has been that for some companies the promised savings have not accrued and the administrative burden has been massive due to the complexity of some of the myriad of schemes on the market.

Additionally many of the savings have proved to be the result of stopping ‘free’ fuel for private use. These savings could have been made and the company cars retained.

Such decisions are now being reviewed and a return to company cars is invariably one of the options being discussed at Board level. However, it is very difficult for an employer to come up with a single policy that is workable from an HR perspective while achieving the optimum position from a cost perspective.

Technically, ECO schemes continue to work and they remain very good as an alternative to some company cars for some employees, but employers must ‘pick and choose’ who is most suited. One size fits all is rarely the right answer.

Moving to an ECO scheme, properly managed by a reputable supplier, can give companies the same control as with a company car fleet. The key to the savings is the amount of business mileage driven and the company’s ability to offset the costs by offering drivers the maximum Approved Mileage Allowance Payments which are tax and National Insurance free.

Irrespective who owns the car all companies are legally responsible for the health and safety of their employees driving on company business. Many companies wrongly believe that allowing employees to drive their own cars on business absolves them of any responsibility. This is particularly with regard to the monitoring of service, maintenance and repair of vehicles, checking that the correct insurance is in place and if vehicles are ‘fit for purpose’.

While a cash alternative and the payment of a mileage allowance may seem straightforward, if HM Revenue & Customs change the current level of tax-free payments or mileage parameters or make other changes as part of their current review, then it could further influence the return to company cars.