THE government’s consultation on proposed car salary sacrifice changes have met with a distinct warning from ACFO that they will backfire.
In its ‘Consultation on Salary Sacrifice for the Provision of Benefits-in-Kind’, HMRC suggests that the higher of the company car taxable benefit and the salary sacrifice/cash allowance sum will be used as the taxable value. HMRC reckons it is losing both tax and NI revenue.
But ACFO, the UK’s premier fleet decision-makers’ organisation, says there will be “unintended consequences” – primarily a reduction in the number of low-emission vehicles operated and a potential growth in older ‘grey fleet’ cars.
ACFO reasons that such salary sacrifice changes will hit drivers of low emission cars the most, because they have the greater difference between their taxable benefit-in-kind and their salary sacrifice amount or car allowance.
The result? Employees would be steered away from low emission cars the government wants to encourage.
Caroline Sandall, ACFO’s deputy chairman said: “The existing company car benefit-in-kind tax regime provides high levels of certainty over the cost of future taxation for both employees and employers.
“Introducing changes of this scale and nature leads to uncertainty and will make both employees and employers question the viability of car schemes, leading to fewer schemes, fewer cars and quite possibly less tax revenue.
“When cars are provided through a salary sacrifice arrangement they remain subject to tax, which is unlike other employee benefits. We believe these ‘catch all’ salary sacrifice proposals are ill-conceived when cars are offered through such an arrangement.”