A new salary sacrifice scheme, developed by Zenith Vehicle Contracts, allows an employee to surrender part of his or her salary in return for a company car.

Zenith says that because the cost of the car is deducted from the employee's gross salary, before statutory deductions, he or she is able to save income tax and National Insurance contributions (NIC).

And even though the employee must pay company car tax, he or she should still be better off financially under the scheme, the firm says.

The scheme is particularly cost-effective when the choice of car is restricted to those with a CO2 rating of less than 120g/km and/or to cars where the manufacturer has provided additional support to reduce the cost to the employer – and, therefore, to the employee.

Largest

Zenith, the UK's largest independent provider of fleet funding and management services, says the scheme is cost neutral to employers as the full cost of the car is met by the employee.

It says companies can also control corporate risk by ensuring that employees use safe, low CO2, well-maintained vehicles which are covered by the company's insurance policy.

By enabling companies to control the types of vehicle being driven by their employees, the scheme will create a greener, cleaner fleet.

Zenith provides employers with a salary sacrifice management service that controls the whole process from calculating payroll deductions to providing all-employee choice lists.

In order that HM Customs & Excise can allow this concession against income tax and NIC, the scheme must be executed via a formal salary sacrifice arrangement, which Zenith can work with employers to implement.