BUSINESS CAR TAXATION - BVRLA POLICY PAPER MARCH 2016
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BVRLA policy paper business car taxation march 2016
The average annual
One fifth of company car tax bill has
company car drivers risen by 12% since 2005-06, but
are paid under total company car
£30,000 p.a. tax revenues have fallen
by 7.5% in the same period.
The number of
Company Car drivers
has fallen from
970,000 in 2009-10
to 940,000 in 2013-14.
The total
average
The 2 percentage
point rise in Company Car Tax tax revenue per salary
bands from 2017, plus the continuation sacrifice car is £4,508.11,
of the 3% diesel surcharge, with an overall estimated
will add an extra £626.94 to the average £270,486,600 received by
company car driver’s bill in 2017-18 HMRC in tax revenue
compared to 2013-14 - per year via salary
a 15.43% increase. sacrifice arrangements.
2
B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Introduction
As the representative body of a major tax contributing sector,
the British Vehicle Rental and Leasing Association (BVRLA)
engages regularly with Government to discuss policy changes
related to the tax regime. The UK vehicle rental and leasing
sector has long demonstrated its value as a contributor to
the economy, purchasing an estimated one million vehicles
(including 308,000 UK-made vehicles) per annum, generating
£24.9 billion in gross value added for the UK economy
and employing 53,600 people. As a result of the activities
supported by the UK rental and lease sector in 2013, the
Treasury received a total £5.2 billion in total tax revenue1.
Both the BVRLA and its members understand the importance and necessity
of taxation, especially in the years following the Global Financial Crisis, and in
meeting the subsequent challenge laid down by the Chancellor of bringing down
the national deficit. Recent changes to company car tax, announced in the 2015
Autumn Statement, and ongoing discussions around the future of initiatives such
as salary sacrifice - including a mention in Budget 2015 - have had an impact on
the behaviour of business car drivers, and the practices of vehicle providers in
the lease and brokering sectors. In particular, BVRLA members have expressed
concern at the Chancellor’s decision to continue the 3% Company Car Tax
surcharge on diesel vehicles, at a time when Company Car Tax bands are due
to rise by 2% from 2017, and the effect that this could have on the numbers of
employees choosing to take a company car.
The purpose of this paper is to therefore provide an industry view on the current
business car sector, alongside an analysis of recent changes to the tax system
and the effects these have or are likely to have upon employers, employees
with company cars, and the vehicle lease sector. Finally, a series of policy
proposals are included, recommending how HM Treasury and the Government
might achieve a “win-win” situation, namely a tax positive revenue alongside a
stable and confident business sector.
Contents
4 Company car and company fuel tax
6 The individual effect company car and
company fuel tax increases
8 The 3% diesel supplement
10 Benefit in kind ratings
10 First year capital allowances
11 Electric vehicles
12 Whole Life cost comparions - 10,000 miles per year
14 Whole Life cost comparions - 20,000 miles per year
16 Salary sacrifice
18 Fuel duty
19 Summary of recommendations
20 Participating organisations
1
The Economic Impact of the Motor Vehicle Full-Service Leasing and Renting Sector
(Oxford Economics, November 2014) at: http://www.bvrla.co.uk/sites/default/files/
documents/economic_impact_of_the_rental_and_leasing_sector.pdf
3
Taxation issue
Company car tax and company car
fuel tax
According to available data from HMRC2, there has been a steady reduction over the past ten
years in the number of company car tax drivers, though the taxable revenue per recipient has
steadily increased. The number of recipients of company car fuel has also diminished, with the
total tax revenue consequently being reduced by 29.5%.
Table 1: Company car and fuel tax revenue versus contributions per recipient
Company car TAX Company car fuel TAX
Year Company Total tax Taxable Company car Total tax Taxable
car drivers revenue revenue per fuel recipients revenue revenue per
(thousand) (£million) recipient (thousand) (£million) recipient
2005-06 1,140 4,130 £3,623 380 1,050 £2,763
2006-07 1,160 4,030 £3,474 360 970 £2,694
3 1,120 4,060 £3,625 340 900 £2,647
2007-08
2008-09 1,010 3,840 £3,802 300 950 £3,167
2009-10 970 3,740 £3,856 270 840 £3,111
2010-11 950 3,660 £3,853 250 810 £3,240
2011-12 950 3,610 £3,800 240 770 £3,208
2012-13 940 3,730 £3,968 220 770 £3,500
2013-14 940 3,820 £4,064 200 740 £3,700
2
HMRC; Taxable benefits in kind: Recipients, taxable value and income tax and NICs liability, by category, 2005-06 to 2013-14, at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/456660/Table_4_5_2005-06_to_2013-14.pdf
3
The BVRLA acknowledges that the basis of calculating company car drivers and car fuel recipients changed in 2007-08.
4
B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Since the Chancellor took office in 2010, Graph 1: Company car tax, 2005-06 to 2013-14
Treasury revenue from company car tax
has increased by £80 million. In the same
timeframe, company car tax has risen by £204
4500 Total Tax Revenue Car (£m) £4,064 4,200
per recipient (5.19%) on average. Perhaps £3,856 £3,968
4,100
as a result of this increasing tax burden, 4000 £3,692
Tax revenue per recipient (£m)
Tax revenue per recipient (£m)
4,000
the number of UK company car drivers has £3,474
£3,802 £3,853
3500 3,900
fallen by 30,000. In the same timeframe, the £3,625
£3,623 £3,800 3,800
number of recipients of company car fuel has 3000
3,700
decreased by approximately 70,000, with a
2500 3,600
resulting loss of £100 million in tax revenue.
3,500
However, company car fuel tax has increased 2000
3,400
by £589 per recipient, a rise of 18.9%.
1500 3,300
2005-06 2007-08 2008-09 2010-11 2012-13 2013-14
In addition, a further increase of 2 percentage est
points per Company Car Tax band was also
announced at Budget 2014, to come into force
in 2017-18, with Treasury revenue estimated
at £240 million in 2017-18, and £480 million in Graph 2: Company car fuel tax, 2005-06 to 2013-14
2018-194, as a result. This increase will therefore
cost an additional £255.32 per recipient in 2017-
18 and £510.64 in 2018-19 – without taking into Total Tax Revenue Car Fuel (£m) 1,200
4000 £3,700
account the continuing decline in the number
£3,500
of employees choosing to take a company car. 1,000
Tax revenue per recipient (£m)
3500
Total tax revenues (£m)
These rises amount to an additional 6.28% 800
rise in 2017-18 and 12.57% in 2018-19 from 300
the most recent figures, or respective rises of 600
6.62% and 13.24% since the Chancellor took 2500
Taxable revenue per recipient (fuel) 400
office.
2000
200
As Graph 2 reveals, company car fuel tax has 1500 0
also risen, most dramatically in 2007-08, and 2005-06 2007-08 2008-09 2010-11 2012-13 2013-14
est
with a further steady increase since 2011-12.
This continuous increase has stabilised the
decline in total tax revenue to the Treasury,
but has resulted in an increase of £492 per
recipient, a 15.34% rise.
4
HM Treasury; Budget 2014 document, p.57 at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293759/37630_Budget_2014_Web_Accessible.pdf
5
The individual effect of company car
and company car fuel tax increases
In quantifying the above statistics, the impact of the increase in the company car and company
fuel tax burden on individual employees has been calculated according to data provided by
HMRC5:
Table 2: Company car and fuel recipients versus income6
Total income COMPANY Car TAX COMPANY Car fuel TAX
Company Company Car Recipients Taxable value
car drivers taxable value (thousands) (£ millions)
(thousands) (£ millions)
0-£30,000 180 390 30 55
£30,001-50,000 370 1310 80 270
£50,001+ 370 2020 110 440
TOTAL 940 3730 220 770
As Table 2 demonstrates, approximately one fifth (19.15%) In terms of company car fuel tax, company car drivers
of company car drivers are paid under £30,000 per annum. paid under £30,000 per annum make up 13.64% of all
Their combined tax contribution was just over 10% recipients of company-paid fuel, which accounts for
(10.46%) of total company car tax receipts for 2012-13. 7.14% of tax revenue for this. Drivers paid between
Company car drivers paid between £30-50,000 per annum £30-50,000 make up 36.36% of the total, and account
make up 39.36% of the total company car tax revenue for for 35.07% of the total tax company fuel tax revenue.
the same period, paying 35.12% of total company car tax For drivers paid above £50,000, who account for
receipts. Finally, the upper-end of company car tax drivers, approximately 50% of the total, these account for
those paid £50,000 and above, also make up 39.36% of 57.14% of total company car fuel tax revenue.
the total, and pay 54.16% of HM Treasury’s total company
car tax revenue.
5
HMRC; Taxable benefits in kind: Analysis of company cars, employer-provided fuel and private medical insurance, by range of total income,
2012-13, at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/456556/Table_4_3_2012-13.pdf
NB: Numbers and amounts less than 10 are rounded to the nearest 5; those greater than 10 are rounded to nearest 10. As a result, the column
totals may not equal the sum of individual components due to rounding.
6
B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Chart 1: Company car fuel – income versus tax From the figures revealed in Table 2, plus those displayed
contributions in Chart 1, it appears that greater levels of tax revenue
could be raised if more employees could be encouraged
to take up a company car. The benefits of this would
be two-fold – as well as increasing options for business
450 (many of which require the flexibility of a company car),
400 providing incentives for employees to take up a company
350
car can also provide a welcome boost for the sale of such
300
250 cars, around a third of which are manufactured in the UK.6
200
150 A further benefit of encouraging the take-up of company
100 cars is bringing greener and safer cars on to UK roads.
50
As BVRLA members’ vehicles are brand new and built
0
to the latest environmental standards, they are typically
1+
0
00
00
cleaner, greener and produce lower emissions (including
00
,0
0,
50
0,
CO2, NOX or particulates) than the average vehicle on UK
£3
£5
-£
0-
roads7, which is older and has a higher level of emissions.
1
00
In 2015, the average newly registered car emitted 122.1g/
0,
£3
km CO28. In comparison, according to the BVRLA’s
Recipients (thousands) Taxable value (£ millions) most recent survey9, the average emissions of a BVRLA
members’ newly registered lease car was 112.6g/km.
The offer of a company car is particularly attractive to
lower-paid employees, as this represents an opportunity
to drive a safer and more fuel efficient new car. The risk
in further increasing the tax obligations for such drivers
is that they are likely to give up their company cars
and instead use their own, older vehicles, which do not
conform to the same safety or emissions standards.
6
The Economic Impact of the Motor Vehicle Full-Service Leasing and Renting Sector (Oxford Economics, November 2014) at:
http://www.bvrla.co.uk/sites/default/files/documents/economic_impact_of_the_rental_and_leasing_sector.pdf
7
According to the SMMT report, “Motor Industry Facts 2015”, the average car on UK roads that year is 7.8 years old; p.26 at:
http://www.smmt.co.uk/wp-content/uploads/sites/2/100049_SMMT-Facts-Guide-2015_UPDATES.pdf
8
According to the SMMT report, “New Car CO2 Report 2016”, the average car registered in 2015 emitted 121.4g/km CO2; p.3 at:
http://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-New-Car-Co2-Report-2016.pd
9
BVRLA Quarterly Leasing survey – fleet CO2 emission trends, at: http://www.bvrla.co.uk/news/leasing-sector-leads-low-emission-charge
7
The 3% diesel supplement
The Chancellor’s announcement in the 2015
Autumn Statement to delay the removal of
the 3% differential between diesel and petrol
cars from April 2016 to April 2021 has caused
concern among the UK vehicle rental and
leasing sector. While it is important to ensure
confidence in the emissions performance of
new vehicles, and equally important to allow
time for the introduction of new and further EU
emissions testing procedures, the perception
is that the Government has penalised the
innocent consumer with a highly punitive tax
bomb.
According to Treasury estimates10, the retention of the
diesel supplement is calculated to increase tax revenue by
£280 million in 2016-17, falling to £275 million in 2017-18
and 2018-19, and £265 million in both 2019-20 and 2020-
21, a total of £1.36 billion.
Payment of these figures will therefore fall upon the
740,000 (out of a total 940,000) company car drivers who
have opted in good faith to drive a lower emission diesel
car over a petrol one, at least partly on the basis of the
Chancellor’s announcement in 2012 that the supplement
would be lifted in 2016.
This means that the average company car driver of a
diesel-engined car will pay an extra £378.38 in 2016-
17, £371.62 in 2017-18, £371.62 in 2018-19, £358.11
in 2019-20 and £358.11 in 2020-21. These additional
payments represent an unexpected charge, based on
the Chancellor’s previous assertion, and a penalisation of
those drivers who have acted fairly, to balance the failing
of the testing regime.
10
Autumn Statement 2015; Energy, environment and transport, p. 112, at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/479749/52229_Blue_Book_PU1865_Web_Accessible.pdf
8
B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Combining these figures with the planned 2 percentage
point increase per Company Car Tax band announced at
Budget 201411 (which will come into force in 2017-18), the
Treasury will receive additional company car tax revenue
of £515 million in 2017-18, and £550 million in 2018-19.
However, this translates to an additional £626.94 per
recipient taking a company diesel car in 2017-18, and
an extra £882.26 in 2018-20, once again assuming that
the diminishing number of company car drivers remains
unchanged. Therefore, these additional charges amount
to a total 15.43% rise in 2017-18 and 21.71% in 2018-19
from the most recent figures, or respective rises of 16.26%
and 22.88% since the Chancellor took office, per diesel
company car.
Such a sharp cumulative rise is unfair to these employees,
many of whom have opted to drive some of the newest,
safest, most fuel-efficient vehicles with low emissions. This
also represents a further disincentive against the take-up
or retention of company cars by employees. This decision
could also further risk many employees deciding to give
up their company cars altogether, in favour of personal
contract hire or more likely, older, privately owned, higher
emission vehicles.
In order to limit this potential future effect, and maintain
both the confidence of company car employees in both
the consistency of the tax system and in the emissions
testing regime, the BVRLA proposes that when employees
decide to adopt an ultra-low emission vehicle as a
company car - e.g.: those choosing a Euro 6C compliant
vehicle before its mandatory introduction - the 3% diesel
surcharge should be waived. This will provide a real
incentive to employees to take up cars with the most
advanced emissions standards, and would be a welcome
encouragement to the company car regime.
In addition, the 3% surcharge should also be removed on
those cars that were ordered prior to the announcement
of its continuation, to remove the unfair retrospective and
unprecedented move of penalising drivers for decisions
based on the published tax rates.
11
HM Treasury; Budget 2014 document, p.57 at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293759/37630_Budget_2014_Web_Accessible.pdf
9
Benefit-in-Kind ratings
In order for Government to sustain the current vehicles attracting an 8% rating.
level of company car tax revenue while
By introducing greater granularity for vehicles with
simultaneously reducing the tax burden on emissions levels between 1-50g CO2/km, mirroring the
company car drivers, we recommend that the remaining ratings system by increasing exponentially the
rating per every 5g CO2 emitted by the vehicle, this will
Government consider a reform of the benefit- provide a greater incentive for employees to drive the
in-kind (BIK) ratings. In particular, the BVRLA greenest car possible, and therefore promote the take up of
would like to see greater granularity on the lower (if not ultra-low) emission vehicles over slightly higher
emission ones.
BIK ratings of vehicles which are at the lower
category end. Reforming the benefit in kind ratings in this way can
provide the opportunity for the Government to relieve the
As the current ratings system demonstrates, petrol vehicles current tax burden on company car drivers – though any
at the lower category end (vehicles with an emissions rating future change to the ratings system must be tax-neutral,
of between 1-50g CO2/km) are currently given a rating of in order to sustain consumer confidence in the company
5% – identical to that of zero emission vehicles – with diesel car market.
First year capital allowances
In April 2013, the Government removed the The BVRLA believes that, for the reasons already stated,
the withdrawal of FYAs has already had a dampening effect
ability to claim 100% first-year allowances on demand for ultra low emission vehicles since 2013.
on low-emission leased cars. Pure electric Leasing and rental are particularly attractive methods of
vehicle finance for companies that are looking to adopt
and plug-in hybrid cars are more expensive new technology, because the leasing and rental companies
than their higher-emitting petrol and diesel take the ‘risk’ on the asset being hired. Companies can
counterparts and such allowances could play in effect ‘try before they buy’ safe in the knowledge that
they can just hand the vehicle back if the technology
a major role in enabling potential buyers to doesn’t meet their needs. At the moment, the cost-gap
bridge this cost gap. between EVs and petrol and diesel vehicles is curtailing
this potential.
The fact that these allowances are still available The leasing and rental industry purchases nearly 50% of
for companies that purchase their assets outright all new vehicles registered in the UK each year, including
more than 80% of those made in this country. Reinstating
discriminates in favour of cash-rich businesses and against
FYAs for our sector could provide a massive impetus to the
others – particularly SMEs – who rely on lease finance to
ultra-low emission vehicle market.
fund their vehicle acquisition.
HMRC officials have stated that this discrimination
against leasing is necessary to prevent companies taking
advantage of the allowances to acquire vehicles that are
used outside of the UK. The BVRLA has yet to find any
evidence of this threat, and also understands that HMRC
has now identified a policy measure which could address it
should it arise.
10B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Electric vehicles
The Government has set an objective that cost, the most attractive and efficient ULEVs, which have
every new car or van registered in the UK the greatest zero-emission range, come out worst in this
comparison.
will be ultra-low emission by 2040, and zero-
emission by 2050. Despite the recent surge in The Government could address this issue by altering the
VED and BIK regimes so that there is more graduation for
ultra-low emission vehicle registrations, which ULEVs, recognising both their average emissions and total
saw 28,188 ULEVs added to UK roads in zero-emission range.
2015, there is a long way to go. The comparisons between Pure Electric vehicles, Plug-in
Company fleets make rational purchasing decisions based Hybrid vehicles and traditional vehicles powered by an
on detailed cost analysis – with Whole Life Costs being Internal Combustion Engine (ICE) are presented on the
one of the key factors. Whole Life Costs take into account following pages.
all the relevant costs for operating a vehicle over a certain
period, including the acquisition cost, tax cost and running
cost.
Although the running costs of electric vehicles are lower
than their petrol or diesel-powered counterparts, their
higher up-front costs means that plug-in ULEVS often
come out worse in a Whole Life Cost analysis with petrol
or diesel - powered vehicles. In fact, due to their initial
11Graphs 3a-3c: Whole Life cost comparisons – Pure electric, plug-in hybrid, and internal combustion engines –
10k miles per annum
Graph 3a 2 years/20,000 miles
£1,000.00
£900.00
£800.00
£700.00
Cost per month
£600.00
£500.00
£400.00
£300.00
£200.00
£100.00
Graph£0.00
3a
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Electric Vehicle Plug-In Hybrid Vehicle Internal Combustion Engined Vehicle
Graph 3b 3 years/30,000 miles
£1,000.00
£900.00
£800.00
£700.00
Cost per month
£600.00
£500.00
£400.00
£300.00
£200.00
£100.00
£0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
12B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Graph 3c 4 years/40,000 miles
£1,000.00
£900.00
£800.00
£700.00
Cost per month
£600.00
£500.00
£400.00
£300.00
£200.00
£100.00
£0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
1 Peugeot ION 5DR Hatch 9 Volkswagen Golf 5DR Hatch 1.4 15 Volkswagen Golf 5DR hatch 1.6 TDI
2 Renault Zoe 5DR Hatch Expression Tsi 204 GTE DSG6 110 Match DSG7
Nav Auto Toyota AYGO 5DR Hatch 1.0
10 16 Audi A4 4DR Saloon 2.0 TDI Ultra
3 Nissan Leaf 5DR Hatch Visia 24KW VVT-1-X-Pure X-Nav X-Shift 150 SE S Tronic
4 BMW i3 5DR Hatch Edrive Auto 11 Volkswagen UP 5DR hatch 1.0 75 17 BMW 320d 4DR Saloon 2.0 Efficient
5 Tesla Model S 5DR hatch 70KWH High ASG Dynamics Plus Auto
6 Audi A3 5DR Sportback 1.4 FS1 204 12 Ford Fiesta 5DR Hatch 1.0T 100 18 Audi S5 2DR Coupe 3.0 TFS1
e-tron S Tronic Titanium Ecoboost Powershift Quattro 333 S Tronic Plus Auto
7 BMW i3 5DR Hatch EDrive Range 13 Vauxhall Corsa 5DR Hatch 1.4 19 BMW 535d 4DR Saloon 3.0
Extender Auto 90 SRI Auto M Sport Auto
8 Mitsubishi Outlander PHEV 5DR 2.0 14 BMW 116d 5DR Sporthatch 1.5 SE
GX3H Auto Nav Auto
Graph 3b reveals that for motorists driving
10,000 miles per annum, the vehicle with the
longest range per charge - the Tesla Model S - is
considerably more expensive across an average
three-year lifespan than a hybrid, and still more
expensive than most traditional ICE vehicles.
Similarly, Graph 3a shows that over two years,
the next best pure electric vehicle by range - the
Renault Zoe - is around £100 less expensive
per month compared to the Audi A3 hybrid.
Furthermore, it is either more or equally expensive
than around half the identified ICE cars across the
same period.
13Graph 4: Whole Life cost comparisons – Pure electric, plug-in vehicles, and internal combustion engines –
20k miles per annum
Graph 4a 2 years/40,000 miles
£1,200.00
£1,000.00
Cost per month
£800.00
£600.00
£400.00
£200.00
£0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Electric Vehicle Plug-In Hybrid Vehicle Internal Combustion Engined Vehicle
Graph 4b 3 years/60,000 miles
£1,200.00
£1,000.00
Cost per month
£800.00
£600.00
£400.00
£200.00
£0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
14B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Graph 4c 4 years/80,000 miles
£1,200.00
£1,000.00
Cost per month
£800.00
£600.00
£400.00
£200.00
£0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
1 Peugeot ION 5DR Hatch 9 Volkswagen Golf 5DR Hatch 1.4 15 Volkswagen Golf 5DR hatch 1.6 TDI
2 Renault Zoe 5DR Hatch Expression Tsi 204 GTE DSG6 110 Match DSG7
Nav Auto Toyota AYGO 5DR Hatch 1.0
10 16 Audi A4 4DR Saloon 2.0 TDI Ultra
3 Nissan Leaf 5DR Hatch Visia 24KW VVT-1-X-Pure X-Nav X-Shift 150 SE S Tronic
4 BMW i3 5DR Hatch Edrive Auto 11 Volkswagen UP 5DR hatch 1.0 75 17 BMW 320d 4DR Saloon 2.0 Efficient
5 Tesla Model S 5DR hatch 70KWH High ASG Dynamics Plus Auto
6 Audi A3 5DR Sportback 1.4 FS1 204 12 Ford Fiesta 5DR Hatch 1.0T 100 18 Audi S5 2DR Coupe 3.0 TFS1
e-tron S Tronic Titanium Ecoboost Powershift Quattro 333 S Tronic Plus Auto
7 BMW i3 5DR Hatch EDrive Range 13 Vauxhall Corsa 5DR Hatch 1.4 19 BMW 535d 4DR Saloon 3.0
Extender Auto 90 SRI Auto M Sport Auto
8 Mitsubishi Outlander PHEV 5DR 2.0 14 BMW 116d 5DR Sporthatch 1.5 SE
GX3H Auto Nav Auto
Graphs 4a, 4b and 4c all demonstrate that for drivers doing 20,000 miles per annum,
the Tesla Model S costs considerably more than any hybrid and the majority of ICE
vehicles - regardless of the lifespan. All other pure electric vehicles are cheaper than
hybrid vehicles, and are comparable on a whole life cost basis to ICE vehicles -
particularly over a four year lifespan.
In order to ensure the greatest adoption of electric vehicles, HMRC should consider
the introduction of a new tax category for EVs where these are taxed on the basis of
the length of range – so for example, an EV with a 50 mile range would receive a higher
BIK rating than one with a 70 mile range. In mirroring the three categories of the plug-
in car grant, administered through the Office for Low Emission Vehicles (OLEV), this
will both provide consistency and incentivise greater economy in EVs. Once again, in
considering any changes to the tax system, any new taxation regime should be tax-
neutral to maintain the take-up of EVs.
15Salary sacrifice
The BVRLA notes the reference to salary
sacrifice arrangements in the 2016 Budget,
that the Treasury will “actively monitor the
growth and development of salary sacrifice
schemes and their effect on tax receipts, and
will look to consult on proposals to amend
the legislation around these if the Treasury
believe that these have an excessive cost to
the taxpayer”.
The BVRLA’s position is that as well as providing choice
and flexibility for road users, salary sacrifice schemes
provide a positive tax contribution to the Treasury,
particularly through encouraging sales of new cars to be
driven by employees in the lowest tax bracket (i.e. those
who would be unlikely to purchase a new car otherwise).
This position is summarised in the BVRLA’s response to
the HM Treasury consultation on remuneration practices,
in which the association included a case study based
upon 2013 sales data provided by one BVRLA leasing
member. This case study revealed the following results:
„„ 84.3% of salary sacrifice arrangements were
with employees in the 20% tax band, i.e. whose
salaries were under £32,010; 14.6% in the 40%
tax band; and the remaining 1.1% in the 45%
tax band
„„ The total estimated first year revenue to HMRC
from direct taxation of salary sacrifice cars in
2013 was £3,370,710.79 and £11,695,742.23
across 36 months (the average length of a
typical leasing arrangement) – this takes into
account the total Vehicle Excise Duty, Company
Car Tax, registration fees, employer Class 1A
National Insurance Contributions 13 (NICs)
and Value Added Tax across all salary sacrifice
arrangements considered.
„„ Based on the above figures, we calculate that
the total average financial contribution to HMRC
(through Vehicle Excise Duty, Company Car
Tax, and Class 1A NICs and Value Added Tax,
plus the original car registration fee in the first
year) per salary sacrifice car will be £1,115.76
in the first year and £3,279.55 across the length
of a typical 36-month salary sacrifice lease
arrangement.
16B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
„„ In addition, the BVRLA calculates that the
additional VAT from the disposal of the car at
the end of the lease (taking an average residual
value of 40% of a company car’s original P11D
value) would equate to a further average VAT
payment made to HMRC of £1,228.56 per salary
sacrifice car. Taking this into account, the total
average revenue to HMRC per salary sacrifice
arrangement is £4,508.11.
„„ As the BVRLA estimates that there are currently
around 60,000 cars operated under salary
sacrifice arrangements in the UK, this translates
to an overall estimate of £270,486,600 received
by HMRC in tax revenue from salary sacrifice
company car arrangements.
„„ Taking this case study as representative of the
salary sacrifice market, if the figure of 84.3%
of salary sacrifice company car schemes is
made up by employees in the 20% tax band,
the total estimated revenue to HMRC from
salary sacrifice schemes by employees in the
20% tax band per 36-month cycle would be
£229,913,610.
The above figures amount to significant tax contributions
to HMRC, the largest of which has come from salary
sacrifice arrangements with employees in the lowest tax
band. This is significant for three reasons – firstly, this
reinforces the view that that overwhelming majority of
employees taking a salary sacrifice car will not previously
have had access to a brand new car. Secondly, the data
suggests that abolishing or adding further taxation to such
salary sacrifice arrangements would disproportionately
impact the lowest paid (i.e. those in the 20% tax band).
Finally, by extension, this would also suggest that these
cars are unlikely to have been purchased by the leasing
company in the absence of salary sacrifice schemes, since
these employees are unlikely to have had the financial
means to buy privately. For this reason, the last figure of
£229,913,610 represents a combined tax contribution
to HMRC which would unlikely have been made in the
absence of salary sacrifice arrangements.
The BVRLA therefore urges HM Treasury not to erode the
availability of salary sacrifice arrangements on cars, given
the benefits to employers, employees (especially those
lower paid), and to HMRC.
17Fuel duty
The BVRLA believes that one of the strongest
contributors to economic growth in both the
rental and leasing sector and in other UK
business sectors provided by the previous
Government was the decision to freeze
fuel duty in 2013. At a time when British
businesses are still recovering from the
global recession, we believe that fuel duty
should remain frozen, which would provide
both consistency and confidence to industry.
We would welcome a commitment from the
Chancellor in 2016 that fuel duty will remain
frozen for the foreseeable future.
18B V R L A p o l i c y p a p e r – b u s i n e s s c ar t a x a t i o n
Summary of
recommendations
The BVRLA offers the Government the
following recommendations in respect of
business car taxation:
„„ Carry out a wholesale review of the current
system and levels of company car taxation,
recognising the benefits of company cars in
terms of reduced emissions and revenue to
HM Treasury.
„„ Abolish the 3% diesel supplement on benefit in
kind tax bands for Euro 6C cars from 2016.
„„ Reform the benefit-in-kind (BIK) ratings, with
greater granularity on incentives for the take-up
of lower emission vehicles. In particular, a wider
differential at the lower category end is required
to provide a larger incentive for the take up of
lower (if not ultra-low) emission vehicles over
slightly higher emission ones.
„„ To reintroduce the balancing charge adjustment
at the point of disposal of lease vehicles, for
both the 18% general pool (vehicles emitting
110g/km of CO2 emission) and the 8% special
pool (111g/km CO2 or above). By returning to
the original system of lease operators receiving
a single tax relief on disposal of lease vehicles,
this would simplify the tax assessment for
lease operators and restore fairness without
sacrificing the financial incentive toward cleaner,
greener vehicles.
„„ Allow leased vehicles to be eligible for 100%
First Year Capital Allowances.
„„ Introduce a new tax category for electric
vehicles (EVs) where these are taxed on the
basis of the length of range (miles travelled
before requiring a recharge).
„„ Provide in-life incentives to ultra-low emission
vehicles to grow confidence in the developing
second-hand market. This is key in ensuring the
roll-out of ULEVs, particularly EVs.
„„ To not erode the benefits of company salary
sacrifice arrangements.
19Participating organisations
The BVRLA would like to thank the following organisations for their
participation in an open roundtable, as well as subsequent discussions:
HM Treasury Clydesdale Bank Lex Autolease
University of Buckingham GKL Car and Van Rental Society of Motor
Business School Hitachi Capital Manufacturers and Traders
Alphabet GB Ltd John Lewis Partnership Synergy Automotive Ltd
Arval UK KPMG Tusker Direct Ltd
Barclays Bank LeasePlan
20You can also read
