September’s Finance Bill provided clarity to fleets on proposed changes to company car tax bands and car salary sacrifice schemes.
A total of eleven tax bands for ultra-low emission vehicles will apply from 2020, according to the Finance Bill.
The correct percentage for benefit-in-kind tax on zero emission cars will be set at 2%, while cars generating CO2 emissions between 1g and 50g per kilometre is set to vary between 2% and 14% depending on how many zero-emission miles each vehicle can travel.
For ULEVs with CO2 emissions between 70g/km and 74g/km, the maximum tax value will increase by one percentage point to 19%.
Cars with CO2 emission figures of more than 75g/km will be taxed the lesser percentage of A) 20% plus 1% for each 5g/km of CO2 emissions exceeding 75g/km, or B) 37%.
All of the above tax changes will apply from April 2020.
David Hosking, CEO of Tusker, has also provided some insight into the Government’s plans for salary sacrifice rules following months of negotiation between Tusker, its tax advisors, HMRC and HM Treasury. The changes, according to Hosking, are in support of the Government’s objective to provide fairer revised tax structures without undermining environmental policy.
Hosking said: “The changes to salary sacrifice put in place by Government protects cars while eradicating the arguably abusive salary sacrifice schemes when some employees had been using the legislation to save tax on wine, drones and even double-glazing.
“This move by Government is to be applauded as it prevents take-up of abusive schemes without harming car schemes that have always been taxed fairly and environmentally, is the right thing to do.
“Under the new rules, the finance rental for the car and all other costs should be separated. However, it appears that many have misunderstood the new legislation and this point has all but slipped under the radar.”
He added: “Tusker strongly supports the Government’s initiative as it means that all company cars are taxed appropriately and the charge for the additional benefits and services does not apply to these company cars. As a result, salary sacrifice car schemes are as attractive as they have always been.”