Reward
What next? As the end of the transitional rules is upon us, employers should have considered whether their ‘use of vehicle’ policies will need to change before or from the operative date. Officers using vehicles would have reasonably expected a period of notice from their employer if their personal tax liability for use of an emergency vehicle is likely to increase. However, as there has been a three-year transitional period officers and employers should have had time to review their positions.
The transitional rules allow the business element (i.e. 8,000 miles ÷ 12,000 miles) to be deducted giving a net taxable benefit of £2,500 for tax year 2019/20. However, with the abolition of the transitional rules from April 2020 the business element can no longer be deducted so the benefit for tax year 2020/21 will increase from £2,500 to £7,500. We don’t consider that the ‘unavailable days’ rules will apply to any great extent to cars provided in the emergency services. This is because the legislation makes clear that, other than in circumstances where the car is simply unable to be used, an unavailable day will be one where it has been used for business purposes but not for private purposes. On a ‘normal’ working day an officer will use the car to commute to work and, since this is a private journey, the day will be classed as ‘available’ and not ‘unavailable’. Similarly, on days when the car is not used at all, the lack of any business use will prevent the day from being ‘unavailable’. We know from the experience of dealing with cases in 2017/18 that reverting to the new ‘use of assets’ rules will cause difficulty to emergency services, especially fire and ambulance services where private use of an emergency vehicle is an inevitable consequence of the vehicle being used for call-out rostering. Notwithstanding the fact that the use of asset rules will increase the tax charges for officers where general private use is permitted, we believe that HMRC has taken a considered approach in respect of a permanent legislative change which has also been made to the emergency vehicle exemption (section 248A of the Income Tax (Earnings and Pensions) Act 2003). Prior to this change, permitted use of the emergency vehicle within the exemption included ordinary commuting when ‘on-call’ (‘on-call commuting’) and other ‘private’ journeys when on-call (‘freedom of movement’). HMRC changed the definition to exclude the ‘on-call’ requirement such that any ordinary commuting fell within the exemption, regardless of whether an officer was on call. This change is not transitional, but permanent, and makes the exemption more practical for all affected employers. HMRC could, justifiably, consider that there is now a real choice for emergency
services when considering how to provide the vehicles needed for call-out and emergency use. Either an emergency vehicle is provided with certain private use prohibited when not on-call (other than commuting), or a vehicle is provided for business use but with no restrictions on its use. In the former case no tax or reporting ...a case for introducing the option of section 248A exempt use obligations arise whereas, in the latter case, there will be a benefit-in-kind based on the full costs and without any reduction for the business use. It should be noted here that the ‘company car’ rules do not give ‘relief’ for any business use either. Even before the transitional rules end there is a case for introducing the option of section 248A exempt use. After all, officers undertaking commuting and/or freedom of movement journeys are already paying tax on such use, including any fuel costs met by the employer. When we get to April 2020, that case becomes much stronger. Although many emergency services have taken the section-248A route for all their emergency vehicles, some have offered officers an alternative of the exemption or a taxable benefit using the ‘use of assets’ rules. This gives the officers a choice of having restricted or ‘unlimited’ private use. However, some emergency services have adopted a third option whereby officers can take a cash sum and provide their own car (the emergency service will fit ‘blues and twos’ and radios). Doing so may provide an unwelcome surprise for those officers who have chosen to avail themselves of the section-248A exemption. Where a cash alternative is available the optional remuneration arrangements must be considered as these require a comparison to be made between the taxable benefit of the car provided and the amount of the cash alternative. Therefore, as the section-248A benefit is nil, officers could be taxed on the amount of the cash option/essential car user allowance, even though they are not receiving it. If the cash option is high enough it might even adversely affect officers paying tax under the ‘use of asset’ rules.
C u rrent £
New £
% increase
4,499 1,353 2,383 2,112 2,557 1,625 2,151 4,084 5,901 2,967 2,684 3,655 4,215 2,385 1,955 2,929 2,676 1,293 6,127 1,729 1,399 1,042 4,682 2,319 2,493 1,681 3,080 2,374 333
10,280 128.50
4,565 4,341 4,077 5,316 5,345 4,714 5,293 8,326 4,543 6,360 6,285 4,811 4,036 4,440 4,936 6,172 5,098 9,094 4,838 5,519 4,763 4,381 4,337 4,938 4,886 4,477
237.40 82.17 93.04 107.90 228.92 119.15
29.60 41.09 53.12
136.96 71.96 14.14 69.22 127.11 68.52 130.64 294.28 48.43 179.81 294.50 357.10 88.92 73.97 193.75
5,482 1546.25
12,028 156.90
58.64 88.58
The amendment to section 248A so that ordinary commuting is now permitted within the exemption should be viewed as HMRC’s way of encouraging its widest application. As significant ‘private’ mileage is now covered by the exemption, it is clearly a sensible option that emergency services should consider implementing before 6 April 2020. n
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| Professional in Payroll, Pensions and Reward |
Issue 58 | March 2020
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