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Fleet industry unites to oppose employee benefit tax hike

The BVRLA and a coalition of other fleet industry stakeholders are working together to oppose possible changes to employee benefits that would impact on fleets and fleet drivers.

BVRLA chief executive Gerry Keaney

The BVRLA says employer-provided cars should be exempted from HMRC’s proposed changes to salary sacrifice schemes

Under a current consultation intended to review taxation on employee benefits to tackle rising costs, HMRC has put forward plans that 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.

HMRC’s proposals suggest that the higher of the taxable benefit and the salary sacrifice/cash allowance sum is used as the taxable 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.

In response, the BVRLA has joined forces with ACFO and a cross section of public and private sector employers to call for employer-provided cars to be exempted from HMRC’s proposed changes to salary sacrifice schemes. Instead the organisations argue that these vehicles are already subject to an effective and progressive tax scheme.

In a statement, the BVRLA said: “The present tax system works for businesses, is fair for employees and 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. 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.”

The organisation added that in the case of salary sacrifice schemes, 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.

“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.

“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.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.