Employees who are provided with a company car for private use will see an increase in the amount of tax they pay, from 6 April 2018.
HMRC have announced that the diesel supplement will increase from 3% to 4% for all diesel cars that are not certified to the Real Driving Emissions 2 (RDE2). How do you establish whether the vehicles that you provide meet the RDE2 criteria?
This is simple, currently no vehicles meet the new criteria therefore all diesel car drivers will see an increase of 1%. Employers will also see an increase in the amount of Class 1A NIC that is payable.
Going forward, it is expected that the V5 vehicle registration document will record qualifying vehicles.
2018/2019 will also see an increase in the van benefit charge and the car and van fuel benefit charges.
The flat rate van benefit charge will increase to £3350, the fuel benefit charge will increase to £633. The multiplier for car fuel benefit charge purposes will increase to £23400.
Year on year increases are expected for car and van benefits so let’s look at what options are available to either reduce the benefits in kind or eliminate them altogether.
Car and Fuel Benefit
If a company car is made available for private use (and let’s face it 99.9% are) there is a tax liability. The important word in the previous sentence is ‘available’. The car only has to be made available (whether it is used privately or not is irrelevant) for private use.
So a car benefit is appropriate however, as the fuel benefit can double the amount of tax payable, is it necessary for the employer to provided fuel for the employee? An employee must undertake, on average, 15000 private miles per year to cover the tax payable for the fuel. Few drivers will undertake such a large amount of private travel.
The option available is for employees and directors is to pay for all fuel and then reclaim the business miles incurred from the employer using the Fuel advisory rates published by HMRC
Van and Fuel Benefit
Although the tax charge for the private use of a van is far less than it is for a car, the rules governing private use are not as strict. Ordinarily, home to work travel is considered private travel. However for employees and directors who are provided with a van, if the only ‘private’ travel is from home to work there is no benefit in kind chargeable for the van and the fuel.
As this is a concession by HMRC, it is important that an employer is able to demonstrate to HMRC, should they ask, that there is no private use. This will ordinarily be in the form of detailed mileage logs or trackers.
Any private use, such as at weekends will attract the full benefit in kind. However careful planning can save the employer and employee tax and NIC
For further information please contact Paul Chappell on 03331 123456
