Last chance to respond to HMRC consultation on car/cash and salary sacrifice

19 October 2016

Fleets have until 11.45pm tonight (October 19) to respond to the HMRC consultation on salary sacrifice and car/cash schemes.

The Government is proposing to change tax legislation so that where benefit-in-kind is provided through salary sacrifice it will be chargeable to income tax and Class 1A National Insurance Contributions (NICs), if the taxable value is higher than the salary sacrificed.

Any company offering a choice of a cash allowance or a company car will also be impacted. The calculation of tax will move away from BIK based on list price/CO2/fuel type to a comparison of BIK versus cash allowance value, with the greater of the two chargeable to income tax and Class 1A Employer NIC.

Following a recent Fleet News/ACFO/BVRLA discussion with fleets and leasing companies, it was agreed that the industry should push for cars to be exempt from the salary sacrifice proposals and for the existing BIK tax regime to be retained.

Cars are already subject to a tax system which is effective, accurate and progressing in incentivising drivers towards the Government’s own objectives on ULEVs and emissions.

“Our analysis suggests that HMRC’s proposals could have a negligible impact on tax revenues as some drivers give up their company cars and stop paying benefit-in-kind tax entirely,” said BVRLA chief executive, Gerry Keaney.

"HMRC’s new proposals would introduce confusion and inequity into the system by requiring employers to change or increase their reporting requirements and by taxing an employee who has a cash alternative to their company car differently from one who has exactly the same vehicle but no cash alternative."

“At the same time, the government risks stifling the uptake of ultra-low emission cars and piling more misery on cash-strapped public sector employers.”

Fleets are strongly encouraged to provide a response to the consultation and also write to their local MPs.

The BVRLA has set up a page which includes a template letter that fleets can adjust, plus a link to the website that tells you your local MP and how to contact them at www.bvrla.co.uk/EmployeeBenefits

Or email your response to Alex Raisen, Employment Income Policy Team, at: Employmentincome.policy@hmrc.gsi.gov.uk

The key areas for consideration, compiled by ACFO, are:

· Impact on salary sacrifice and car/cash schemes

· Compliance burden for employers and employees, affecting both p46/p11d reporting and the HMRC on-line driver portal

· Tight timescales for implementation of April 2017

· The changes would create inequity of tax paid – cash allowances paid vary company to company

· Vehicles most impacted are low emission vehicles, at a time when government is trying to tackle emissions/air quality

· The impact is likely to be most felt by those on basic rate tax employees

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Jon - 19/10/2016 10:25

BIK has increased year on year so its no shock that car allowance has become a better option for both business and driver. HMRC have panicked due to a self created "loop hole" and come up with a knee-jerk confusing solution which punishes those who are environmentally conscious! The fix is simple- go back to the drawing board and find a simpler solution which narrows the gap but doesn't punish those that have chosen a fuel efficient car.
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Stu - 20/10/2016 11:29

Whilst I agree with Jon, there are a number of things that people do not always take into account when choosing to opt out - simplicity, no upfront lease cost, servicing, tyres, accident management and of course insurance. All of which is normally included on a company car scheme. The company I work for don't push either way, however, they make it very clear that if you opt out, you must not only provide proof of business insurance, but you are entirely responsible for providing a car for business use at all times.
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