HMRC recently released a set of statistics in relation to the type of benefits shown on forms P11D for the 2014/15 tax year. A form P11D is a return to HMRC of the benefits in kind and taxable expenses provided to employees by their employer. The deadline for the form is the 6 July following the end of the tax year and most employers will be furiously working away to meet this deadline.
The statistics do, however, make interesting reading as they show that the most popular benefit is private medical or dental insurance or cover with over two million employees receiving this benefit from their employer.
The provision of a company car is the second most popular benefit with almost a million employees enjoying what is seen by other European countries as a very British benefit. Indeed over the years it has been common place for manufacturers of UK vehicles to ensure that the vehicles that they aim at the company car market have a low benefit in kind value and therefore are tax-efficient for the typical company car fleet.
This is very likely to continue. For example, from 6 April 2017, Ultra Low Emission vehicles (i.e. those with CO2 emissions under 75g/km) will not be caught under the new Optional Remuneration Arrangement (salary sacrifice) rules and therefore the employee can only be taxed on the benefit-in-kind value of the company car and not the car allowance or salary they waive to receive the benefit.
This means that electric and hybrid cars are becoming excellent value for the cash conscious company car driver. For example, for 2017/18 the recently updated BMW i3 will have be taxed on 9 per cent of its list price of £32,340. For a 40 per cent tax payer this will mean a tax bill of less than £100 per month.
Likewise Tesla will also be launching a new model aimed at the lucrative BMW 3 series and Mercedes C class range later this year. The Tesla 3 is rumoured to cost around £30,000 and will also be taxed at 9 per cent providing motoring with a tax bill of approximately £90 per month. It’s also worth noting that Mercedes, Jaguar and Audi all plan new ‘luxury’ electric or hybrids in the coming 12 months.
The main complaint with hybrids and electric cars in the past has been their range but with new models now purporting to have ranges over 300 miles this is likely to become less of an issue in the coming years.
So it will be interesting to see if HMRC’s stats in 2020/21 show an increase in company car ownership. Will company car drivers consider this a way to low cost motoring or more importantly will employers see this as part of their green agenda?
For more information please get in touch with Graham Farquhar, or your usual RSM contact.