PART 2: TAX
liability for the employee even if those benefits and expenses were reported. Dispensations could be revoked by HMRC at any time and potentially retrospectively where it is felt that the employer has failed to comply with the terms of the dispensation, or did not declare to HMRC all the necessary information when the dispensation was granted. In addition, penalties, including retrospective penalties, may still be imposed where a serious breach of the dispensation has occurred. To be valid, a dispensation had to be agreed between an employer and the employer’s PAYE compliance officer. The terms of every dispensation had to be regularly examined by the employer to ensure that any expenses paid gross still complied with the agreement. For example, a dispensation for a specific expense payable at a stated fixed rate became invalid when the reimbursed value of that expense changed. It could never be assumed that current practice was covered by dispensation. For example, from 6th April 2002 all, or parts, of dispensations, relating to payments for travel in an employee’s own vehicle ceased to be valid. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS The need for dispensations was replaced on 6th April 2016 by a new statutory exemption for expenses reimbursed. Employers still need clear policies and processes with robust verification procedures in order to use the new exemption. ELECTRIC VEHICLE CHARGING SCHEME From April 2018 employees will not incur a benefit in kind charge to tax on the cost to the employer of electricity used to charge an electric vehicle. This will apply whether the car is a company car or personally owned vehicle. Whether or not the car is used for employer business will also not have an effect on the tax relief. EMPLOYEE CAR OWNERSHIP SCHEME (ECOS) An ECOS scheme, or similarly named arrangement, is designed to provide employees with a benefit similar to that of a company car in such a way as to avoid a Company Car Benefit charge. To avoid a car benefit one of the conditions that defines a company car must not apply. A scheme may be designed by an employer, by a company within the same group as the employer, or by a specialist third party, whereby employees buy cars from a specified (often single) source and within a specified financing period. The definition of when a company car benefit arises with conditions identified (i) to (viii) is when - (i) a car (i) is made available, (i) to an employee (including a Director), (i) (or to a member of their family or household), (i) without any transfer of the property in it, (i) by reason of the employment, (i) is available for private use (it does not have to be used), and (i) the benefit of the car does not constitute earnings from the employment by any other provision. The two key factors in deciding whether the provision of the car through an ECOS avoids the provision of a Company Car Benefit charge is whether: • availability is by reason of employment (clearly in a scheme set up by the employer this No printing, copying or reproducti permitted.
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