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Treasury ‘railroading’ dealership tax changes

The Treasury has been accused of railroading plans to change the way dealer staff pay benefit-in-kind (BIK) tax on cars.

The Retail Motor Industry Federation has written to Exchequer Secretary Angela Eagle expressing concerns at the proposals to end local tax arrangements in favour of new national ones.
It has accused the Treasury of failing to research the issue or consult with the industry.

In the letter, Sue Robinson, RMIF director, says: “The change is happening at a time when dealers are under severe financial pressure and are struggling to cope with the economic environment.

“Their staff too, are under increasing pressure with many sales staff seeing falls in income as less cars are being sold. To make the change now appears to be poorly timed.”

Robinson also says the RMIF and other trade bodies were told the changes were subject to consultation.

“However, it very shortly became apparent this was not a consultation process and that a national agreement had already been set out,” the RMIF’s letter says.

Her Majesty’s Revenue and Custom is to introduce new rules for motor dealers to calculate the BIK tax for dealer employees on April 6. It says the new arrangements will mean less administration and a fairer system compared to present arrangements.

The RMIF’s concerns are:

  • Dealers are likely to struggle with the high levels of paperwork required by the new system. Dealer groups will have to draw up separate banding frameworks for each dealer site rather than one across the group. A site of 10 dealers will need to have 10 banding schemes compared to a previous one.
  • Many employees will not have their correct codes for the new tax year and will not be aware of a possible change to their tax code
  • There has been little publicity to ensure dealers
    are aware of the changes. HMRC has had no direct
    contact with dealers or vehicle manufacturers.
  • Dealers have little control over their demonstrator
    vehicles. Manufacturers set demonstrator requirements which must be met by the dealer to meet contractual requirements of the franchise.

Accountants Mazars also warns of an increase in red tape through the new BIK measures – and urges a deferment in their introduction.

Alastair Kendrick, a director, said: “The current period of unprecedented industrial upheaval will of course
magnify the detrimental impact on the proposals. We are seeking dialogue with the Treasury as the short notice period is unreasonable given the substantial amount of work the shift will generate.”

Currently demonstrators are used as ‘company cars’ out of hours. The taxable benefit on these is calculated based on a typically provided car. The reforms will require dealers to determine taxable benefit on these vehicles, at the beginning of each tax year, grouped according to list price and CO2 emissions.

The new rules can be viewed at: http://www.hmrc.gov.uk/cars/averaging.pdf
 

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