Plans put forward by the UK Taxman could affect up to 650,000 people who have taken a salary sacrifice car or receive a vehicle as part of a ‘cash or car’ benefit scheme.
Under the HMRC’s proposals a higher level of the taxable benefit and the salary sacrifice/cash allowance sum could be used as the taxable vehicle value.
This would hit drivers of low emission cars the most, because they have the greatest difference between their taxable benefit-in-kind and their salary sacrifice amount or car allowance.
The BVRLA (British Vehicle Rental and Leasing Association) and its members have joined forces with ACFO and a cross section of public and private sector employers to share their concerns with ministers, MPs and policymakers.
Research recently conducted by Oxford Economics for the BVRLA estimates that the employer-provided car sector is responsible for around 217,000 new registrations each year with this purchasing power supportingmore than 37,000 UK jobs.
The BVRLA has responded to the HMRC consultation this week, calling on the government to exempt employer-provided cars from the changes, explaining that unlike other employee benefits hich remain untaxed, company cars are already subject to an effective and progressive tax scheme.
The present tax scheme has proven very successful in helping the government meet its policy goal of increasing the uptake of low emission vehicles.
Company cars are the dominant source of Ultra-Low Emission Vehicle registrations in the UK, partly because the Government incentivises employees to select the greenest car by reducing their tax bill.
The BVRLA suggests under the proposals the Government will end up punishing those drivers who have done the right thing by choosing the greenest car. These drivers could be left hundreds of pounds a year worse-off. ULEV registrations are likely to plummet as drivers choose cheaper, higher-emission company cars, use their cash allowances to fund second-hand cars or opt-out of their employer’s benefit scheme.
In the case of salary sacrifice schemes, the BVRLA argues that the government would end up punishing drivers who would otherwise struggle to afford a new, low-emission car. Three-quarters of recipients are basic-rate taxpayers, many of whom work for the public sector in areas poorly served by public transport.
BVRLA Chief Executive, Gerry Keaney.
“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.
At the same time, the government risks stifling the uptake of ultra-low emission cars”