Car salary-sacrifice schemes could raise £4.7m for the Treasury in 2017 and are a valuable way of rewarding and retaining basic-rate taxpayers by helping them into cleaner and safer vehicles, according to the fleet industry as it begins a campaign to ensure the schemes aren’t killed off by new Government rules.

HM Treasury and Customs last month launched a consultation on the future of salary sacrifice, specifically excluding only pension and pension advice, childcare and cycle schemes, amid concerns that other salary sacrifice, including mobile phone and iPad provision as well as cars, are depriving the Treasury of income.

Leasing firm and salsac expert Tusker claimed its research showed that the positive tax contribution of cars delivered in 2016 is projected to be at least £1m, and benefit-in-kind tax increases fuelling new orders should push that to £4.7m next year.

“We went through every single vehicle ordered on our scheme since the beginning of this year and balanced the tax saving made by the employee and employer in each case against the tax contribution from the lease,” explained Tusker chief executive David Hosking. The analysis that salary sacrifice cars are tax-positive includes incremental revenue from VAT on additional services, lease agreements and vehicle disposals.

The British Vehicle Rental and Leasing Association has declared it will make a “strong case” for car salary-sacrifice schemes to receive special consideration from HMRC.

“These company car schemes offer a valuable way of rewarding and retaining staff, particularly for many public sector orgainsations who have had to struggle with long-term pay freezes,” said BVRLA chief executive Gerry Keaney, who also extolled the benefits of getting people on lower incomes into newer models.

“The average salary-sacrifice car has CO2 emissions of just 104g/km, is less than 18 months old, and is more likely to meet the latest safety and emissions standards,” he said. “These vehicles provide a more sustainable alternative to the older, more polluting grey fleet cars that staff might otherwise use for business travel.”

Top leasing firm Leaseplan also declared that car salary sacrifice could be ensnared as an unintended target of legislation.

“What HMRC appears to have missed is that the tax treatment of all cars provided under salary sacrifice is very different and is already taxed as a company car,” said head of consultancy services Matthew Walters. “It is crucial that we continue to work with HMRC during the consultation period to ensure this is understood.”

Walters also expressed concerns about the timescales for any decision, with the consultation closing on 19 October 2016 and HMRC looking to introduce the new measures at the beginning of the next tax year in April 2017. “It will be a real challenge for businesses to test, adopt and introduce tax/P11D or any payroll changes in that time,” he said. “With cars already attracting benefit-in-kind in a tax regime that was introduce in the early 2000s, HMRC should reconsider its timings and the generally applied principles more carefully.”

The BVRLA also expressed concerns about the timings, stating that it will be reminding HMRC that any future changes would “need to be properly signposted so that employers and drivers are given at least three years’ notice and can plan accordingly”.

“It seems that salary sacrifice cars have been caught in the crossfire as the Government seeks to eliminate the practice of employers offering benefits that do not attract any tax on a benefit in kind, or those that solely deliver tax savings,” concluded Tusker’s Hosking. “Company cars clearly do not fall into this category and we welcome the Government’s consultation to dispel the myth that our car benefit schemes are the same as these other salary sacrifice options.

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