Company car tax
The benefit in kind charge for having private use of a company car continues to increase. Figures published in t h e Budget set out the charges for 2019-20, to inform employees about the future tax cost of using a company car. Even low emission cars in the 0-50g/km band will be hit with a charge of 16% of list price from that year onwards.
Zero emission vans
The tax charge for zero emission vans will remain at 20% of the standard charge for 2016- 17, rather than increasing to 40% as originally planned. The standard charge for a company van is set at £3,170, meaning that the amount charged to tax on a zero emission van will now be £634. Consequently, a basic rate taxpayer will pay tax of £126.80 on a zero emission van and a higher rate taxpayer will pay £253.60.
Fair bargain rule
A benefit in kind tax charge does not generally apply to a transaction that is a ‘fair bargain’ between the employee and the employer; for example, where an employer provides a service to employees at the same cost and on the same terms as to the public.
The law will be clarified from 6 April 2016 to ensure that the fair bargain rule doesn’t apply to benefits which are calculated using a specific set of rules, such as those for living accommodation, cars, vans and cheap loans. Instead, the benefit in kind tax charge will continue to apply and will be reduced by any payments made by the employee.
This potentially means that an employee may be in a worse position than a member of the public. The employee may suffer a benefits in kind charge on top of the market rate paid to the employer for the goods or services. However, employees who hire cars from their employer who is in the hire-car business are excluded from the application of this rule.