Fleet News

Taxman's bombshell hits staff motoring schemes

A SHOCK tax demand from the Inland Revenue has forced two of the UK's largest employers to change their staff motoring schemes. British Aerospace and GEC are now in negotiations with the taxman, after the Inland Revenue deemed that their employee car schemes should incur benefit-in-kind tax.

The tax bombshell will force other fleets that have implemented similar schemes to examine the small print of their own contracts. A total of about 6,000 BAe and GEC drivers now face benefit-in-kind tax bills, despite the fact that the scheme was only open to staff who were not eligible for a company car. A spokesman for BAe said the company was in legal negotiations with the Inland Revenue about the car scheme, but added that is was 'unlikely' that BAe would expect its staff to pay the unexpected tax bills. GEC declined to comment.

Both GEC and BAe had adopted a scheme operated by Rover Corporate Finance which offered staff an all-encompassing motoring package for Rover Group cars at rates below those available to retail customers in dealerships. This included routine service and maintenance, road fund licence, roadside assistance and recovery, fully comprehensive insurance, and no residual value risk, all for a fixed monthly outlay deducted directly from employees' payroll.

The two engineering giants have now changed the structure of the scheme so that staff taking out new contracts will not face fresh benefit-in-kind tax demands. The revised policy now resembles a personal contract purchase policy rather than the original personal lease type arrangement. The Inland Revenue declined to comment on its discussions with BAe and GEC, but said the cases had only come to light through normal compliance work.

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