Professional March 2020

REWARD

Emergency vehicles – time for action

Peter Minchinton, employment taxes senior manager at PSTAX, reviews developments, previews the potential impact, and discusses employers’ actions

R eaders from the emergency for Professional last year. We warned at that time of changes coming into place from April 2020 following the end of the transitional rules. As a result of the changes, the original ‘use of assets’ legislation enacted in April 2017 will become relevant to police, fire and ambulance services in respect of their provision of vehicles fitted with ‘blues and twos’. Prior to April 2017, the legislation allowed employees to obtain tax relief on the business element of the ‘use of asset’ benefit so that they were only taxed on the private use. In April 2017, the rules for determining the level of chargeable benefit on the ‘use of assets’ changed. The new rules eliminated the opportunity for any deduction in respect of the business element of the benefit, meaning that the taxable amounts would increase and, indeed, increase significantly where officers used their cars primarily for business purposes. Although the new services sector may recall that we penned an article on this topic

rules allowed a deduction for ‘unavailable days’, the guidance on how this should be interpreted appeared to show that such a deduction would only rarely apply in practice. ...use of an existing vehicle on the same terms will create

use of an existing vehicle on the same terms will create a significantly increased tax burden. In discussions with a client we received a list (see Table) of provided cars taxed as assets showing current and new taxable benefits amounts, along with the percentage increases. The illustrative example below shows how the benefit in kind charge could increase significantly from tax year 2020/21 onwards. Illustrative example The car is purchased on 31 March 2019 for £25,000. Running costs, including servicing, maintenance and insurance are £3,000 per year. The officer undertakes business mileage of 8,000, ordinary commuting mileage of 2,000 and, ‘freedom of movement’ (private use when on call) 1,000, together with other private mileage of 1,000. The officer pays £500 a year towards private use. The benefit for 2019/20 is: £25,000 x 20% = £5,000; plus running costs of £3,000; minus private use of £500 gives benefit of £7,500.

a significantly increased tax burden

Following representations, the transitional rules were introduced which reinstated the pre-April 2017 rules and, in terms of the ‘cash equivalent’ calculation, even allowed payments for personal use to be deducted after the reduction for the business element, rather than before as per HM Revenue & Customs’ (HMRC) previous guidance. However, the transitional rules will come to an end on 5 April 2020; and, thereafter, continued

| Professional in Payroll, Pensions and Reward | March 2020 | Issue 58 42

Made with FlippingBook - Online magazine maker