Compliance
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the use of asset charge could be quite substantial from April 2020 onwards. There was also a sting in the tail whereby if any private fuel costs were paid for or not recovered from the employee, the whole cost of the fuel had to be included in the computation, including business fuel, which would otherwise not be taxable. That left emergency services considering how the lights could be fitted without being permanently fixed and still meet operational requirements Exploring alternatives With the introduction of the new rules from 6 April 2020, emergency services started to consider the alternatives to the use of assets benefit charge. Many of them had made the change over the intervening years to restrict private mileage to just commuting and on-call mileage so that the emergency vehicle exemption applied and there was no tax charge to worry about. However, some emergency services wanted to allow their employees to use their vehicles for other more general private use and sought to mitigate the use of the asset charge. Electric cars were a potential solution. There were concerns about mileage range and the prohibitive costs, but as time went on, ranges improved and incentives brought the costs down. However, for uniformed officers who need to operate under blue light conditions, the fitting of fixed blue lights meant the cars couldn’t be treated as company cars but had to be treated as assets. The prohibitive cost of electric cars meant the use of the asset charge would be even higher. A small sop would be that electricity is not a fuel for the purposes of calculating the benefit under the use of asset rules so the costs of charging the car could be eliminated if set up correctly.
However, that still didn’t allow the cars to be treated as company cars unless the blue lights weren’t fixed. What has HMRC said? During the transition period, several options were mooted and, as the author’s firm was providing advice on emergency vehicles, we produced a paper on the potential for cars not being fitted with fixed blue lights. The starting point was the tax case of Gurney v Richards, where the provision of fixed blue lights was critical in taking the car out of the company car rules. The crucial paragraph was: “In the present case, before the vehicles had the flashing lights fitted, they were, of course, of a type commonly used as private vehicles and were suitable to be so used. But they were then adapted by the fixing of permanent flashing lights. In my judgment that was a change of type for this reason alone, that with the flashing lights fixed the vehicle was in a condition in which it would not be lawful for any member of the public to drive it on a road unless he could show that it was used for fire brigade purposes and was accordingly an emergency vehicle… But in my judgment a vehicle which is altered so that, without being reconverted, it cannot be used lawfully on a road by a member of the public unable to show that it is used for fire brigade purposes cannot be said to be of a type commonly used as a private vehicle, nor in my judgment can it be described as suitable for such use.” We submitted the paper to HMRC who agreed, with caveats, that if the blue lights weren’t fixed then the company car rules could apply. So, that resulted in emergency services considering how the lights could be fitted without being permanently fixed and still meet operational requirements. For the experienced readers, you’ll remember the magnetic stick-on lights used by Starsky and Hutch and Kojak. Would these be sufficient? One emergency service certainly thinks so. Details are still being worked out but, with the permission of the emergency service concerned, we will update the position with an article in a later issue of Professional . Any emergency service organisation thinking along similar lines should take appropriate advice regarding their specific circumstances to help ensure that any arrangements are fully tax compliant. n
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| Professional in Payroll, Pensions and Reward |
Issue 79 | April 2022
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