Get on your bike - Has HMRC got it in for company cars? By Rebecca Benneyworth

With the rail system under criticism from a senior committee of MPs, HMRC have recently announced that they will be further turning up the heat for drivers. Not content with virtually driving the company car off the road, HMRC now intend to raise additional tax from drivers who have switched to their own car for business journeys.

A second stage evaluation of the company car tax reforms implemented in 2002 were published as part of the Budget earlier this year.

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Comments

Message to Simon Sweetman

Anonymous | | Permalink

Mike,

You're lucky. In my part of East Anglia there are no trains and a bus which runs once a week on a Wednesday. It's very useful for meeting clients!

carnmores's picture

Matt

carnmores | | Permalink

good pun

Lets face it the car is a necessity for most of us

Anonymous | | Permalink

If the government (like previous ones before it) really had emmissions and pollution as its uppermost concern then it would increase the prices of cars with higher emmissions rather than the much smaller annual running costs. It might also introduce a sort of R&D style credit for manufacturers that reduced emmissions or developed new technology to reduce or replace the worst polluting fuels.

But it's much more about revenue generation - this government benefits from taxing us as polluters - but how much of that money though goes back into cleaning things up? How much into congestion reducing methods (without taxing us more)?

Revenue generation

Anonymous | | Permalink

Drivers should benefit for acting responsibly.

ALL benefit from less pollution. Lost revenue from drivers is the cost. If unaffordable, whole country must cough up.

But let's just tax drivers again. Not as if they can do anything about it...

choice and motors

oldersimon | | Permalink

Some of us have to use the car (though we could use a small car). In East Anglia - and in many other places - it is only possible to visit clients (or for them to visit you) by using the car, because Dr Beeching pulled up the railways and the one bus a day that much of the area is left with is not much help.

fuel only rates

chrisholmes | | Permalink

The fuel only rates should be revised by the Treasury if the price rises by more than 10%. http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm. Looking at my local garage price, the petrol rate should now be reviewed although there is someway to go before diesel is due for review.

Drastically overpriced?

Brian Gooch | | Permalink

Trains are "drastically overpriced" on some routes, but some bargain fares work out much cheaper than even my car (which costs around 7p/mile for fuel alone, ignoring wear & tear, servicing, etc costs).

But just as a thought, turning it on its head and looking at the bigger picture, is it so much that trains are drastically overpriced or that road use is drastically underpriced, with maintenance, policing, health, etc, costs that are a number of times the amounts "paid" for their use in terms of fuel duty (and RFL). The road pricing debate has a long way to go yet!

Cost per mile of cars

Brian Gooch | | Permalink

Following on from Simon's comment, I think I recall an analysis by the RAC that the total cost per mile of ownership of an average car was of the order of 50-60p per mile, calculated over the period of ownership.

Behavioural aspects of tax

AnonymousUser | | Permalink

If I understand this correctly, the government uses tax to try to persuade us not to drive - which seems very reasonable. When it is successful, the government gets upset it has lost revenue, and taxes us anyway. So why bother making an effort to avoid tax when you will end up paying it anyway, and have the inconvenience of travelling by train?

Cheer up Gordon

AnonymousUser | | Permalink

Just think of the tax take on company vans when you start challenging the "all or nothing" taxpayer's claims that they are only used for business. OK, you may have to wait until auditing the 2007-08 P11Ds, but even so ...

On your bike

duncannaylor | | Permalink

One wonders what the impact on Corporation and Income Tax Revenues would be of encouraging bicycle use. A twenty mile round trip for a one hour meeting and there goes the day.......

Get on your bike? Be serious.

ChickPea | | Permalink

The suggestion that "getting on your bike" is a sensible response to threats of taxing ECOS schemes is risible.

My partner, as an essential part of her job, covers an area from Mid Wales to Cumbria, and from the West Coast across as far as Nottingham and Derby. Possible on a bike? I don't think so- even for 20p a mile.

So I guess the tax we pay as a family will just climb; either that, or we'll buy our own car, and claim the 40p. If we're forced into this by this taxation measure, we shall certainly *not* look to minimise the CO2 produced- in fact, a nice 20 year old banger will fit the bill (cheap insurance once it's 50 years old).

Thinking further ahead

djw090 | | Permalink

Last time company car tax was overhauled they missed a key point.

They recognised that the old system could encourage unnecessary or even imaginary journeys. However, they failed to recognise that the level of benefit is a function of the level of private mileage and that the highest proportion of private mileage is travel to work. As a result company cars, especially fully fuelled ones encourage people to live further from work. What has now happened is that people who live closer to work have opted out of the company car while those living further away are still in them.

The system for taxing company cars would be better if it had a credible mechanism for reflecting the level of private mileage.

Home carers

AnonymousUser | | Permalink

What about the effects on homes carer's who must use a car to travel between their clients homes.

Even with the most fuel effecient cars the cost of the number of short jouneys far outways the 40p/25p reliefs available.

It will force these people to find alternative employment

cars

oldersimon | | Permalink

Interestingly, most of the people I come across - usually directors of small companies - insist that 40p a mile nothing like covers the actual cost of using their own car for business, especially with increased fuel prices.

But what kind of bike?

Elenderil | | Permalink

There are more ways to travel on two wheels than by peddle power.

Although I have the luxury of being able to walk to my normal office each day (and here in London that is a real luxury compared to rush hour travel times)I do have to travel both to clients and other offices. When the weather is good my prefered solution is my trusty Honda VFR.

I never fail to arrive without an ear to ear smile on my face, I'm alert and ready for action (adrenaline will do that!)and I also find that it sparks a lot of conversations and makes me stand out from the crowd. I always check in advance to ensure that there is somewhere to change into a suit before the meeting and that the client will not be upset by my arriving by bike. The usual response is "what do you have" followed by a chat on the pro's and cons of a particular make and model.

From a tax point of view I receive 24p per mile under AMR arrangements with no 10,000 mile cut off. Unlike peddle cyclists though I don't get any tax assistance to purchase safety equipment so lid and leathers don't come tax free.

From a green perspective I put out less polution as I'm running a very efficient 788cc motor, there are less resources going into manufacturing my vehicle and I use less fuel and oil.

There seem to be a larger and larger number of us on motorcycles in and around central London so I assume I'm not alone in making this choice.

carnmores's picture

Sitting Ducks

carnmores | | Permalink

as i sit in a traffic jam pondering how and on what we will be taxed next, i was trying to arrive at the tax raised by a mid range company car used by a 40% over a 4 year life span.

i have come up with a very scientific back of the envelope calculation of £30k. am i too low or to high.

this government has never faced upto taxation seriously by addressing the higher rate situation in a reasonable mannner; it prefers to salami slice every else that moves and some things (my car) that dont

Online meetings

asquithandco | | Permalink

Why not reinstate tax incentives for IT, make broadband free or enhance tax allowances and thereby encourage (ultimately) online meetings. Who needs transport?

Tax Avoidance

baseline | | Permalink

So HMRC have actively encouraged tax avoidance. Disgraceful! Can we have more please.

HMRC target ECOS

AnonymousUser | | Permalink

Having discovered that 150,000 drivers have jumped car into ECOS arrangements, HMRC are now scratching around to see what evidence exists for charging ECOS as an employee taxable benefit.

HMRC are currently looking at:

1) How ECOS schemes work
2) What factors have driven ECOS expansion
3) ECOS impact on CO2 emissions against company cars
4) If ECOS offers an employee advantage that should be taxed as a BIK and how
5)The wider impact a BIK charge might have on ECOS or on the used car market.

If an employee is paid a cash car allowance it is liable to tax / NICs. The AMAP rates have not increased for years and it is now doubtful that the previously held HMRC view that people were making a profit out of AMAP allowances now holds true with rising fuel costs etc.

The only area I see that HMRC has scope for is on discounting arrangements or possibly a benefit linked to CO2 if evidence shows car CO2 under ECOS is higher, on average, than for company cars.