European price harmonisation, parallel and grey imports and investigations firstly by the Office of Fair Trading and now the Competition Commission (formerly the Monopolies and Mergers Commission) are undermining UK new car prices. This threatens the revenue yield from the new tax regime because this will be based on a car's list price.
'We will still be using the car's price as the starting point for calculating the tax charge because it is well understood and widely accepted as a fair measure of the benefit,' says Sara Woollard, policy adviser to the Inland Revenue. She confirms that, if static, new car prices or below-inflation increases will be factored into future Revenue forecasts.
The proposed regime gives the Inland Revenue the flexibility to raise benefit-in-kind tax income swiftly simply by moving the emission level targets used to calculate the percentage of list price for the tax charge.