Fleet News

KPMG urges employers to give better tax advice to company car drivers

LEADING accountancy practice KPMG has advised employers to provide each of their company car drivers with a personalised tax liability estimate for their current car under the new tax system.

Employers should also communicate clearly to staff about how they can reduce their tax liability when their car is next changed, according to Matthew Hunnybun, head of KPMG's company car group carWise.

'A limit on CO2 emissions permitted on new car orders could guide employees towards more tax-efficient cars. This could be set by grade, with senior grades facing fewer restrictions. This limit could be set fairly high in year one and then reduced, perhaps in line with the 10g/km per annum decrease in the starting point of the new regime.'

Hunnybun has identified a 'lack of understanding' that next April's emissions-led changes will deliver tax windfalls to many drivers.

'Some may be in for a cut in their tax bill of more than 50 per cent if the cars they choose have low carbon dioxide emissions,' he said.

KPMG has found, however, that a growing number of employers and company car drivers have undertaken a quick review of the tax changes, made high level judgements on a small number of calculations, and are now making 'knee-jerk' reactions without realising that 'short-term fixes rarely work with such a valuable and emotive benefit as the company car.'

'Many employers appear to believe the move from a business mileage-based system to one based on CO2 emissions will lead to higher tax charges for many of their employees, and hence increased employers National Insurance charges,' he said.

Overall, KPMG anticipates that the new tax system will encourage some drivers to want to give up their company cars, while others will want to keep them or even take a company car for the first time.

'It may well be that we see a reversal in the shift that has taken place in recent years of employees preferring cash to heavily taxed company cars. The Inland Revenue seems to think so and is working on the assumption that 200,000 company cars will appear on the roads as a result of the introduction of the new rules,' said Hunnybun.

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