PAYROLL INSIGHT
Hey dude, it’s an emergency
Peter Minchinton, employment taxes consultant at PSTAX, sounds alarm about HMRC’s response to calls to ease the taxable benefit
H M Revenue & Customs (HMRC) are requiring a change to the accepted method of calculating the benefit on an emergency vehicle where private use is permitted. Some officers in the emergency services are provided with cars fitted with ‘blues & twos’ to enable them to respond to emergencies. In some instances, the officers are permitted to use their car privately when not on duty. Initially, these cars were taxed under the normal rules for ‘company cars’, currently using list price and CO2 emissions. However, in 1989 a fire officer challenged this on the grounds that his car, being fitted with a flashing blue light, made it ‘a vehicle not commonly used as a private vehicle’ and thus outside of the ‘company car legislation’. It was also unsuitable as a private vehicle because the Road Vehicle Lighting Regulations 1989 make it
illegal for a member of the public to use a vehicle on the road fitted with a fixed flashing light. Not wanting to lose revenue, HMRC then decided that if the car didn’t fall within the ‘company car’ rules it was still an asset provided to an employee for private use and so was taxable under the ‘use of assets’ rules, and this has been the method of calculation ever since. However, a little digression. Some emergency services did not permit their officers to use their cars privately, apart from home to their normal base and they had to take them home in order to respond to emergencies. That was still ordinary commuting mileage, but it was accepted that this was a requirement of the job and so from April 2004 any car that met the criteria and was only used for ordinary commuting and local journeys whilst on call was exempt from a tax
charge. Therefore such cars need concern us no further. So, we are now left with those emergency vehicles where private use is permitted and so are taxed under the ‘use of assets’ rules (section 203 et seq. of the Income Tax (Earnings and Pensions) Act 2003) (ITEPA). The cost of the taxable benefit is the higher of: ● the annual value of the use of the asset, normally 20% of the market value of the asset when first provided as a benefit, and ● the annual amount of the sums, if any, paid by those providing the benefit by way of rent or hire charge for the asset, together with the amount of any additional expense. From that benefit any amount paid by the officer for the private use of the vehicle is deducted. That net benefit is the amount on which Class 1A National Insurance contributions (NICs) are calculated. HMRC guidance allows the benefit to be adjusted according to the availability of the asset or its actual use. The guidance says: “In practice whether the tax charge is calculated on the basis of availability of
...illegal for a member of the public to use a vehicle on the road fitted with a fixed flashing light
| Professional in Payroll, Pensions and Reward | June 2017 | Issue 31 16
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