Colleges need EV salary sacrifice approval where financial risks remain

Colleges considering electric vehicle salary sacrifice (EVSS) schemes must obtain Department for Education approval where the arrangements do not protect the college against costs or liabilities if an employee fails to meet their contractual obligations to the scheme provider.GOV The College financial handbook 2026, effective from 1 August 2026GOV, permits schemes without prior approval where comprehensive mitigations ensure that no such cost or liability falls on the collegeGOV.

The college must clearly document those mitigations and follow the separate EVSS guidance. Before entering a scheme, it must follow its procurement requirements, ensure it has resources to manage the arrangement, obtain legal, HR and audit advice, and give employees clear information, including advice to seek independent guidance on tax and pension implications.

Employees’ individual salary sacrifice leasing agreements must clearly state that the employee is responsible for the vehicle and all chargeable costs, including early termination fees and those relating to damage or poor maintenance. Recommended safeguards include retaining some National Insurance and employer pension savings as a fund or insurance for early-ending leases, controlling participation, limiting employees to one vehicle, and reviewing the scheme annually with findings presented to the board.

Intervention status also matters. The approval guidance now expressly notes that intervention can trigger approval requirementsGOV. The EVSS guidance's two sections differ in wording. Its approval section tells colleges under a Notice to Improve to follow the notice's conditions on consulting DfE. Its operating section states that, if a trust or college is under an NtI, ‘trusts and colleges must seek DfE written approval before entering the scheme’. Colleges should clarify the applicable requirements with DfE before committing.

Where approval is needed, the college should read the required-information guidance and submit the FE transaction approval request form. The person completing it must be authorised by the college's accounting officer. DfE will coordinate with HM Treasury or the Charity Commission where their approval is also needed, without a separate application. The FE transaction process covers further education and sixth-form college corporations and designated institutions; it does not apply to academy trustsGOV.

Approval must be obtained before proceeding beyond delegated authority, and the college can proceed only once DfE sends proof of approval. A refusal means the transaction must not proceed. Processing can take several weeks, and longer if additional information or Treasury approval is needed. Retrospective requests use the same form, receive extra scrutiny and are not approved automatically.

Colleges already operating a scheme should assess compliance and move to a compliant arrangement at the earliest opportunity without breaching existing provider agreements. The governing requirements are College financial handbook 2026 paragraph 2.30 and DfE's electric vehicle salary sacrifice and FE transaction approval guidance.