On 23rd November, the Chancellor of the Exchequer, Philip Hammond, delivered the final Autumn Statement as he announced that in future this annual statement will be delivered in the Spring and the main Budget will be released in the Autumn. Here is the take from the ERA Fleet Cost Management Team.

Salary Sacrifice

Following the recent consultation regarding the viability of salary sacrifice, it has been confirmed that from April 2017 salary sacrifice benefits, including company cars with a cash alternative, will attract income tax and employer’s Class 1A NI contributions at the greater of:

  • The amount of the salary sacrificed
  • The cash equivalent value of the benefit

An exception has been made for Ultra Low Emission Vehicles (ULEVs), which the government defines as a vehicle with CO2 emissions up to and including 75g/km.

The decision has also been made to protect employees that take a car via salary sacrifice by 6th April 2017 and those with current arrangements in place. This protection will last until April 2021.

The government has implemented these changes despite the Office of Tax Simplification (OTS) pushing for the simplification of such tax structures. No clarity has been provided within the Autumn Statement regarding the potential additional tax burden for employees who have the option of a company car or cash alternative, where the cash alternative is deemed to be a higher benefit than the scale charge of the car being taken. We will need to see the small print within the Finance Bill, due out early December, to fully understand and comment on this aspect of the new legislation.

Company Car Tax

The annual increases in place within current legislation impact on low emission cars heavily, so the government has announced changes to take affect from April 2020:

There will be 15 new tax bands created (11 for ULEV’s) which includes a 2% scale charge calculator for zero emission vehicles (which is a reduction from 16% as per current legislation). Above this there will be a 1-50g/km band where the rate will vary between 2% and 14% depending on how many miles may be driven at zero emissions.

What is not clear at this point is the tax rate for cars with emissions between 51 and 89g/km, again we will need to wait for the detail within the Finance Bill for this information.

Van and Fuel Benefit

The statement confirmed the following increases:

  • Van benefit increases to £3,230 p.a. (up from £3,170)
  • Van fuel benefit increases to £610 p.a. (up from £598)
  • Car fuel benefit increases to £22,600 p.a. (up from £22,300)

Other Measures

Fuel Duty has been frozen for the 7th consecutive year, which has been widely welcomed. Savings at the pump will equate to around £130 for an average car and £350 for a van.

Insurance Premium Tax (IPT) will rise to from 10% to 12% from June 2017. This is the third increase in short succession and results in a doubling of this tax in a little over 18 months. It would not be a surprise to see IPT at the same rate as VAT in the near future.

Infrastructure

  • £1.1Bn to be spent on local roads and transport, particularly to ease congestion
  • £150M to improve flood defences (possibly a rationale for IPT increase)
  • £80M to improve charging infrastructure for electric vehicles including 100% first year capital allowances for businesses to invest in charging points.
  • £100M for new connected and autonomous vehicle (CAV) testing infrastructure.

Vehicle Excise Duty

(previously announced in 2015 Budget)

  • The VED payable on the first year will continue to be calculated by the CO2 emissions of the car with increases for all but zero emission vehicles.
  • Cars with CO2 emissions of 1g/km or more will move to an annual standard VED tax rate of £140
  • If a car’s list price is over £40,000 at first registration, there will be an additional supplement of £310 on the first 5 years the standard rate is paid
  • Vans unaffected.

Article by: Sean Bingham