HMRC has published new guidance on company car tax liability during the lockdown and changes to salary sacrifice rules.

The new guidance clarifies company car ‘availability’ during lockdown

Part of a raft of measures on treating expenses and benefits during the outbreak, the new guidance on company car ‘availability’ means employees who still have access to both a company car and the keys will be liable for Benefit-in-Kind tax even if they’ve not been using the car, building on the announcement a month ago.

The new rules from HRMC say that for drivers furloughed or working from home, fleets will still need to treat the car as being made ‘available for private use’ during this period even if the employee is:

• instructed to not use the car
• asked to take and keep a photographic image of the mileage both before and after a period of furlough
• unable to physically to return the car or the car cannot be collected from the employee.

Where cars can’t be physically handed back, HMRC will only accept that a company car is unavailable when the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer. In cases where the contract has been terminated, this applies from the date that keys are handed back but for contracts not terminated, cars will be classed as unavailable after 30 consecutive days from this date.

HMRC has also confirmed changes to salary sacrifice as a result of the pandemic. The guidance sets out that: “Changes in circumstances because of coronavirus are accepted as a lifestyle change which allows salary sacrifice arrangements to be reviewed. If your employee chooses to amend a salary sacrifice arrangement because of coronavirus, you must make sure the change is reflected in the terms and conditions of their employment.

“The rules on salary sacrifice changed in April 2017 and for most arrangements entered into before 6 April 2017, these new benefit valuation rules now apply.

“The transitional rules apply for a longer period where the benefit is:

• the provision of a car with emissions of more than 75g CO2/km
• provided living accommodation
• the payment of school fees

“The new rules will not apply to these types of benefits until 6 April 2021, unless employees vary or renew their arrangements.”

The guidance also sets out new measures for volunteer fuel and mileage costs, both in company cars and private cars, and sets out exemptions on tax costs for employers paying or refunding transport costs.

To read the guidance in full, click here.