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Dealers warned of BIK tax changes

Changes to the way that dealership staff are taxed for using demonstrators or company cars could leave dealers open to fines.


Dealers are being advised to ensure they are aware of and acting upon the revised Benefit In Kind (BIK) rules in order to avoid action from HM Revenue & Customs.

Barry Cooper of Cooper Solutions told delegates at a recent AM  Dealer Council Chairmen meeting: “The networks need to go away and discuss this, your dealers must determine how well sorted are they to go through a review from HMRC in the next few years.”

Cooper said the new system requires dealers to look at what demonstrators and loan cars were in the business between January 17 to January 31, and allocate these into 10 bands based on their retail prices. Then, from looking at the CO2 emissions for each band, allocate BIK to it.

A car’s CO2 emissions place it in a band, which gives the percentage BIK tax a driver will pay on that car. In the 2010/11 tax year the base rate is 15% for cars producing less than 130g/km of CO2.

This rises by 1% in 5g/km increments, to a maximum of 35% for cars producing 230g/km and above.

Finally, allocate staff to each band and ensure they do not use cars from other bands – this must be the BIK band that each driver will keep for the rest of the year.

Cooper said it will be vital for dealers to keep records showing that drivers are sticking to their bandings. Cooper Solutions is in the final stages of creating software that will help dealers with this.

“It is likely that HMRC will see this as an opportunity to get back some of the money it has had to pay out to the industry in VAT refunds in recent years,” he said.


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