{"id":984,"date":"2016-11-17T16:17:16","date_gmt":"2016-11-17T16:17:16","guid":{"rendered":"http:\/\/www.withcreative.co.uk\/dev\/employees-with-the-option-of-a-car-allowance-could-be-hit-by-new-hmrc-proposals\/"},"modified":"2021-01-13T00:40:37","modified_gmt":"2021-01-13T00:40:37","slug":"employees-with-the-option-of-a-car-allowance-could-be-hit-by-new-hmrc-proposals","status":"publish","type":"post","link":"https:\/\/dev.withcreative.co.uk\/langricks\/employees-with-the-option-of-a-car-allowance-could-be-hit-by-new-hmrc-proposals\/","title":{"rendered":"Employees with the Option of a Car Allowance Could be hit by New HMRC Proposals"},"content":{"rendered":"
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Proposals being considered by HMRC could have a significant impact for companies (and their employees) that offer a choice of a company car or a car allowance. The effects would be particularly severe where users have opted for low emission vehicles.<\/p>\n

The review is part of the HMRC appraisal of salary sacrifice schemes in general. Currently, the BIK value determines the tax paid by an employee with a company vehicle. This is no different if employees have the option of taking a car allowance instead of a company provided car. These rates are highly favourable for hybrid and low emission vehicles.<\/p>\n

The proposal being considered is that if an employee has the choice of \u00a0a cash allowance or a vehicle, the tax liability will be determined by the taxable value of the cash allowance they were offered if it is greater than the taxable value of the benefit.<\/p>\n

Fleet News produced the following illustration:<\/p>\n

A driver who was offered a cash sum of \u00a35,400 (\u00a3450 per month), but decided to opt instead for a Volkswagen Golf, with emissions of 109g\/km, would pay an additional \u00a386 if a 20% taxpayer, or \u00a3173 if in the 40% bracket (see panel). \u00a0The employer would also pay Class 1A National Insurance (NI) on the higher amount, an additional \u00a359 in tax.<\/em><\/p>\n

If they opted for a plug-in hybrid Golf, with emissions of 39g\/km, the employee\u2019s tax bill would rise by \u00a3579 for a 20% taxpayer or \u00a31,159 if they are in the 40% bracket. The employer would also have to pay an additional \u00a3400.<\/p>\n

While these are only proposals it would be wise for companies to assess their liabilities should the new measures come into effect.<\/p>\n

If you have any questions about financing company vehicles, payroll or tax the team at Langricks will be happy to help.<\/p>\n