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Dealerships warned over potential car tax pitfall

Changes to the way that dealership staff are taxed on 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 HMRC.

Barry Cooper, of Cooper Solutions, told delegates at this month’s meeting of AM’s Dealer Council chairmen: “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 advised by HMRC 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, said Cooper, allocate staff to each band and ensure they do not use cars from other bands – this must be the BIK band that each driver keeps for the rest of the year.

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