The Chancellor, Philip Hammond, has confirmed in the Finance Bill that the Government will tax the ‘package’ of benefits received by salary sacrifice drivers with their car.
Insurance, maintenance, tyres and breakdown cover, the fleet industry was told, would not be taxed when a new tax regime for so-called Optional Remuneration Arrangements (OpRA) was introduced.
However, less than a year later, HMRC claimed their omission was an “oversight” and they should have always been included in the original legislation.
Tax officials told Fleet News that the error had not been identified during the initial consultation on the OpRA policy proposals. It therefore claims it is simply correcting a “mistake” and the changes will now apply from April 2019.
Industry estimates suggest that for those drivers affected, it could cost them an additional £100-240 in tax per year. Employers will also end up paying more Class 1A National Insurance.
The Finance Bill, published yesterday (Wednesday, November 7), says: “The changes ensure that when a taxable car or van is provided through OpRA, the amount foregone includes costs connected with the car or van which are regarded as part of the benefit in kind under normal rules.
“In addition, the changes adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the year.”
It continues: “This provides that the total amount foregone, which is to be taken into account in calculating the amount reportable for tax and NICs purposes, includes both the amount foregone with respect to being provided with the car and the amount foregone with respect to the costs connected with the car (such as insurance), which are regarded as part of the benefit in kind under normal rules.
“The cost of a driver and fuel are not to be included as these are chargeable under separate provisions.”
For more on this story, see the next edition of Fleet News, published on November 15.