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Employees to benefit from zero emission company vehicles

Employee benefits changes focus on zero emissions, and includes changes to company car and van benefits, an expanded exemption for welfare counselling and an increased working at home flat rate.

12th Mar 2020
Director Writetax Ltd
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Company car benefits

In 2017 it was announced that for all new cars registered from 6 April 2020 the carbon dioxide emissions figure for the purposes of determining the car benefit charge will be based in the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). The appropriate percentages for most cars whose CO2 emissions are determined under the WLPT are reduced by two percentage points as compared to those registered prior to 6 April 2020, and whose emissions are measured under the New European Driving Cycle. The means that where a car registered prior to 6 April 2020 would have an appropriate percentage of 8%, the appropriate percentage for a car registered on or after that date would be 6%. 

For 2021/22 the appropriate percentage for cars registered on or after 6 April 2020 will be one percentage point lower than that for cars registered prior to that date. The figures for cars registered on or after 6 April 2020 will be brought into line with those for cars registered after that date from 2022/23.

As a result, when working out the car benefit charge for 2020/21 and 2021/22, it will be necessary to take into account the date of the car’s registration, as well as its CO2 emissions.

Electric and low-emission cars

Special rules apply for zero emission cars. The appropriate percentage for zero emission cars is set at 0% for 2020/21, 1% for 2021/22 and at 2% for 2022/23, regardless of the date on which the car was registered.

From 2020/21, the appropriate percentage for cars with emissions in the 1—50g/km band will depend on the car’s electric range. 

The maximum charge for 2020/21 remains at 37%. This will apply to cars registered before 6 April 2020 with emissions of 160g/km and above to cars registered on or after 6 April 2020 with emissions of 170g/km and above. The diesel supplement remains at 4%.

Car and van fuel benefits

The car fuel benefit multiplier will increase to £24,500 for 2020/21. The flat rate van fuel benefit charge will increase to £666. Both are increased in line with the rise in the consumer prices index (CPI) for the year to September 2019.

Van benefit

The van benefit charge for vans will increase to £3,490 for 2020/21. Zero emissions are taxed at 80% of the full rate – a charge of £2,792 for 2020/21. 

Legislation is to be introduced in a future finance bill to reduce the van benefit charge for zero emission vans to zero, for vans that produce no carbon dioxide emissions. The measure will take effect from April 2021.

The charge for zero emission vans was gradually being brought into line with the full van charge and was due to reach parity from 2021/22. This measure will remove the charge where zero emission vans are available for unrestricted private use.

Welfare counselling

The scope of non-taxable counselling services provided by employers for employees is to be extended to include related medical treatment, such as cognitive behaviour therapy, which is provided to employers as part of an employer’s welfare counselling services. This exemption will take effect from 6 April 2020.

Good news for homeworkers

Where an employee works from home under a homeworking arrangement, the employer can pay, tax-free, a flat rate allowance to cover the additional costs of working at home. The maximum allowance that can be paid tax-free is increased from £4 per week to £6 per week with effect from April 2020. 

Response to loan charge review

Following the independent review of the loan charge led by Sir Amyas Morse, legislation is to be introduced in the Finance Bill 2020/21 to give effect to a number of recommendations made by the review. The measures were announced in January and the legislation has been published in draft

As a result, the loan charge will only apply to loans that were still outstanding on 5 April 2019 which were made on or after 9 December 2010 and before 6 April 2016, which have been fully disclosed to HMRC, and HMRC did not act on that disclosure. All loans taken out on or after 6 April 2016 will be subject to the loan charge if they were outstanding on 5 April 2019.

Budget

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