Salary sacrifice car schemes will continue to provide “a
cost effective way” for employees to drive a new, insured, fully maintained
vehicle, according to LeasePlan.
Following publication of the 2017 Finance Bill,
legislation will come into effect, as expected, from 6 April to limit the
income tax and employer National Insurance advantages of car salary exchange
arrangements and where a car or cash allowance option is available.
Called Optional Remuneration Arrangements (OpRA) by HM
Revenue and Customs, there will be no distinction made between salary sacrifice
and cash or car in terms of how the rules will be applied with employees taxed
on either the value of the cash allowance or the taxable value of the company,
whichever is the higher. Ultra-low emission vehicles (75g/km or less) are exempt
from the new rules.
Matthew Walters, head of consultancy services at
LeasePlan UK, claimed the new rules would not have “a big impact on employees”.
He said: “Whilst it depends on a number of scheme design
elements, the fact of the matter is; that whilst the vast majority of new salary
sacrifice car drivers will see an increase in costs, this is marginal and in
most cases it is a matter a few pounds a month.
“Salary sacrifice for car schemes, where available, still
represent a cost effective way of driving a brand new, insured, fully
maintained vehicle. Plus, employees have the surety of provision by employers
using their supplier partnerships to ensure drivers get the best service
possible. Employers also need to consider that these schemes are not governed
by size of employee base and can be introduced at little or no cost and no
“Whilst the legislation does introduce an added degree of
complexity, responsible providers simply need to provide drivers with the right
degree of transparency in their quotation tools and tax calculators (for both salary
sacrifice and/or where drivers have the option of cash or car) to allow
employees to make the right choice, based on the right information. They also
need to provide employers with the right P11D information to make reporting to
HM Revenue and Customs as straightforward as possible.
“LeasePlan UK remains committed to salary sacrifice for
car schemes and in readiness for the changes, all our quoting tools and tax
calculators will be updated with the new rules over the first weekend in April
ahead of the tax year change. This will include cash allowance comparisons,
where appropriate, and will provide full transparency over the period of the
contract. Our whole life cost (WLC) engines will also be changed to reflect the
correct Class 1A National Insurance contributions costs based on the cash
allowance in play or the company car tax value.”
LeasePlan will also be implementing a new on-line digital
tax guide in association with Deloitte which fleet managers and drivers will be
able to access to understand the new rules in more detail.
Later in the year LeasePlan will be publishing its annual
Fleet Funding Guide which will provide a comprehensive view on the fleet and
tax landscape. To reserve a copy of the guide go to www.easiertoleaseplan.co.uk