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New car benefit rules will see winners and losers

HM Revenue and Customs is to revise the way in which company car benefit for employees in the motor industry is calculated by rolling out a national agreement to replace local rules.

Although the changes have been announced after consultation with the industry’s main trade bodies – Retail Motor Industry Federation, Scottish Motor Traders Association, Society of Motor Manufacturers and Traders, British Vehicle Rental and Leasing Association and the Association of Car Fleet Operators – Sue Robinson, director of the RMIF’s National Franchised Dealers Association, does not agree with the action. 

“It was imposed on us,” she said. “The meetings we had with HMRC were for discussions but it was already decided. We’re not sure this is the correct way forward.”

Cars made available to employees in the motor sector are chargeable to tax and national insurance in the same way as cars made available to workers in other forms of employment.
However, HMRC has had ‘car averaging’ agreements to ease the administrative burden for employers in the motor industry in connection with employees that have no specific car allocated to them. 

Averaging overcomes the issue of multiple forms P11D and P46 (Car).

It says the process needs to be simplified. The current rules require individual agreements between each dealer and its local tax office, which has led to a lack of consistency and perception of unfairness.

HMRC has now developed a new national agreement to apply to all motor industry employees that are not allocated a specific car. It should mean less paperwork for dealers and a levelling off of the rules for different sizes of dealer.

However, some staff will have to pay more tax, depending on the car they drive, while others will pay less tax. 

“There will be winners and losers, but we think there will be more losers,” said Robinson.

She added: “HMRC wants to stop the unfairness of the current rules, but that unfairness was caused by them failing to monitor and control the situation properly, not by dealers taking advantage.”

These new arrangements do not change current legislation. Instead, they seek to expand on existing best practice implementing car averaging across the motor trade, according to HMRC. Employees who are not in a car-averaging agreement will be unaffected.

Further details about the national agreement, which comes into force from April 6, 2009, can be viewed on the HMRC website – www.hmrc.gov.uk/cars/averaging.pdf

It replaces all locally agreed arrangements and will be reviewed with trade bodies in autumn 2009 to resolve any anomalies.

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