Car allowances new rules in 2017
Discussion
So it would appear the Government has slipped something into the rules regarding company cars and allowances in the Autumn Statement which came into affect in April.
Basically if you are offered a car allowance OR a company car and you choose the Car then you are taxed on the cash value of the allowance OR the BIK value of the car which ever is the highest. Unless the chosen Car is below 75g. This seems clear enough if somewhat unfair to those choosing relatively efficient cars.
However some people have also interpreted this the other way around, ie if you take a car allowance and buy a relatively inefficient car you are still taxed on the BIK of the Car not the cash. This really does seem unfair and somewhat difficult to make work in practice.
Can anybody shed any light on this, I've read quite a few explanations on the net, but it seems to be possible interpret them all in different ways.
The HMRC website seems silent on it, unless I couldn't find it.
Basically if you are offered a car allowance OR a company car and you choose the Car then you are taxed on the cash value of the allowance OR the BIK value of the car which ever is the highest. Unless the chosen Car is below 75g. This seems clear enough if somewhat unfair to those choosing relatively efficient cars.
However some people have also interpreted this the other way around, ie if you take a car allowance and buy a relatively inefficient car you are still taxed on the BIK of the Car not the cash. This really does seem unfair and somewhat difficult to make work in practice.
Can anybody shed any light on this, I've read quite a few explanations on the net, but it seems to be possible interpret them all in different ways.
The HMRC website seems silent on it, unless I couldn't find it.
As far as I am aware the rule changes only relate to company cars, not those taking a car allowance. The changes are, briefly, that if you are offered a company car or a car allowance then if you opt for the company car you will be taxed on whichever is the higher; the BIK figure or your gross car allowance equivalent.
The exception to this is if you opt for a PHEV as a company car as these are exempt; you will just pay the BIK for the car you choose. There are also subsidies being levied on diesel cars, making them less attractive as a company car, despite their obvious efficiency in terms of fuel consumption.
As far as I know, there are no such changes to those opting for a car allowance; certainly my fleet department have not advised us as such. I also imagine that such a change would need to be properly publicized and rolled out as there would be obvious disadvantages for those already on an allowance with their own car.
The exception to this is if you opt for a PHEV as a company car as these are exempt; you will just pay the BIK for the car you choose. There are also subsidies being levied on diesel cars, making them less attractive as a company car, despite their obvious efficiency in terms of fuel consumption.
As far as I know, there are no such changes to those opting for a car allowance; certainly my fleet department have not advised us as such. I also imagine that such a change would need to be properly publicized and rolled out as there would be obvious disadvantages for those already on an allowance with their own car.
Trabi601 said:
People are getting very confused.
A car allowance is and continues to be taxed as extra salary.
Company cars continue to be hit by emissions based BIK.
You've read stuff about capital allowances, which aren't applicable to employees.
No I haven't.A car allowance is and continues to be taxed as extra salary.
Company cars continue to be hit by emissions based BIK.
You've read stuff about capital allowances, which aren't applicable to employees.
I may have interpreted something wrong or read a badly written report from someone, but I've not read anything about capital allowances.
velocemitch said:
No I haven't.
I may have interpreted something wrong or read a badly written report from someone, but I've not read anything about capital allowances.
OK, someone has confused capital allowances with car allowances, then!I may have interpreted something wrong or read a badly written report from someone, but I've not read anything about capital allowances.
Whatever has happened, there's no big change to be concerned about.
This one is reasonably clear;
http://www.fleetnews.co.uk/news/company-car-tax-an...
But still if I have agreed an increase in salary to fund a car, is that an allowance? if I buy a car with that money do I get taxed on the emissions of the car if the BIK ends up a higher value than the marginal rate.
It seems to resolve around the definition of salary sacrifice and car allowance... very confusing and not clear cut at all.
http://www.fleetnews.co.uk/news/company-car-tax-an...
But still if I have agreed an increase in salary to fund a car, is that an allowance? if I buy a car with that money do I get taxed on the emissions of the car if the BIK ends up a higher value than the marginal rate.
It seems to resolve around the definition of salary sacrifice and car allowance... very confusing and not clear cut at all.
Oh, salary sacrifice is a very, very different proposition to a car allowance.
There were all kinds of schemes to avoid tax using salary sacrifice over the years - but loopholes have been closing.
Unless you are involved in one of these schemes, there's nothing to worry about - a car allowance isn't salary sacrifice (it's subject to usual taxes - salary sacrifice is a way to avoid tax).
There were all kinds of schemes to avoid tax using salary sacrifice over the years - but loopholes have been closing.
Unless you are involved in one of these schemes, there's nothing to worry about - a car allowance isn't salary sacrifice (it's subject to usual taxes - salary sacrifice is a way to avoid tax).
Trabi601 said:
Oh, salary sacrifice is a very, very different proposition to a car allowance.
There were all kinds of schemes to avoid tax using salary sacrifice over the years - but loopholes have been closing.
Unless you are involved in one of these schemes, there's nothing to worry about - a car allowance isn't salary sacrifice (it's subject to usual taxes - salary sacrifice is a way to avoid tax).
OK seems reasonable, but it doesn't seem all that clear how you accurate define the difference.There were all kinds of schemes to avoid tax using salary sacrifice over the years - but loopholes have been closing.
Unless you are involved in one of these schemes, there's nothing to worry about - a car allowance isn't salary sacrifice (it's subject to usual taxes - salary sacrifice is a way to avoid tax).
velocemitch said:
OK seems reasonable, but it doesn't seem all that clear how you accurate define the difference.
Salary sacrifice reduces your base salary, ie. reduces your gross, to take advantage of a tax loophole. I do this to top up my company pension.Car allowance is in addition to your agreed base salary, and is taxed at normal rates.
You'd know if you were subject to salary sacrifice.
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