PBR expert opinion: PricewaterhouseCoopers

Company car tax expert at Pricewaterhouse Coopers, Gary Hull gives his expert opinion on the PBR.

Company cars

"There have been a number of announcements in relation to company cars:

• Cars solely propelled by electricity will be free from Income Tax and National Insurance contributions for a five-year period from 6 April 2010. This may encourage employers to consider the provision of electricity propelled vehicles for low mileage drivers and also as pool cars for local business journeys . There will be no need to keep detailed business mileage records to demonstrate that only limited private use has been undertaken.
• The benefit value used for calculating the private fuel scale charge will be increased from £16,900 to £18,000 from 6 April 2010. This represents a 6.5% increase and should make more employees re-consider the financial benefits when compared with the cost of private fuel, particuarly if individuals are also caught by the new 50% tax rate. It should make every employer consider the financial effectiveness of buying out this 'benefit' as it will further increase the employer breakeven point which is already well in excess of 30,000 private miles for many employees.
• The removal of the rules regarding Qualifying Low Emissions Cars from 6 April 2012. Instead, the 10% CO2 related percentage will apply to cars with CO2 emissions of up to 99g/km with the graduated table of 1% increases applying thereafter for each additional 5g/km i.e. 100 g/km to 104g/km will equate to an 11% CO2 related percentage, 105 g/km to 109 g/Km will equate to 12% etc. This is a further incentive for manufacturers to produce even lower CO2 emission cars from April 2012 and for employers and employees to choose them. 
   

Company vans

"Some of the changes in relation to company cars have also been replicated in relation to company vans:

• Vans solely propelled by electricity will also be free from income tax and National Insurance Contributions for a five-year period from 6 April 2010. As most van drivers will only use the vehicles on business and for home to work journeys then this change is unlikely to effect many employees .
• However, the Chanceller has also announced plans (subject to compatibility with State aid rules) to extend 100% first year capital allowances to new (not second hand) electric vans which could make this an attractive proposition from a tax and environmental perspective for many employers for local journeys/deliveries;
• The benefit scale charge for the provision of private fuel to company van drivers is being increased by 10% to £550 from 6 April 2010. 
   

Other matters of interest

• Employees who have a frequent change of cars (typically in the retail car sales industry) have since 6 April 2009 had their car benefit calculated on an "averaging" basis which involves a seven step process. There has recently been some changes announced for 2010/11 onwards for steps 1 & 2 as follows:

1. Stefor 2009/10, the cars actually available to staff for private use was based on the night of 5/6 April 2009. For 2010/11 onwards, this is changed to a night of the employer's choice between 17 and 31 January in the previous year (for 2010/11, this would be 17 - 31 January 2010).
2. once the cars are selected, they are separated into groups based on the list price of the car (including accessories, delivery costs and VAT). For 2010/11 the price bands have been amended for cars with a list price between £31,000 and £40,000.

Overall comment

"There are no real surprises in any of these announcements as the Chancellor continues to link the taxation of vehicles to their CO2 emissions.

"PwC is giving more advice than ever on how to provide low Co2 emission cars as both a business tool and a valuable element of the employee reward package.

"This may involve redesigning an existing car scheme or as part of a flexible benefit / salary sacrifice arrangement .

"There is the opportunity to limit the grey fleet and integrate these arrangements into green travel plans.

"As a result employees drive CO2 efficient vehicles, both for business and private purposes, saving themselves and their employer fuel costs.

"This gives the right socially responsible message to customers and other stakeholders as well as giving company directors an assurance that the vehicles used by their employees are always insured and maintained for business travel.

"These benefits are achieved at the same time as saving money for the employer and enhancing the value of their employee reward packages."