KPMG seeking ‘perk tax’ clarity

Recent HMRC draft legislation regarding remuneration rules could have an effect on company car taxing policy, according to David Chandler, KPMG senior manager, benefits and technology.

The rules, which start from 6 April 2011, but could be applied retrospectively from December when the draft was published, are intended to ensure that benefits received in addition to salary – typically given in the form of trusts or other perks and which seek to avoid or defer the payment of income tax or National Insurance – are taxable.

The legislation means that where a third party, for example a leasing firm, is involved in providing what is known as ‘disguised remuneration’ and which could include company cars, an employee will be subject to an income tax charge. If this were the case, company cars would be taxed on their market value rather than CO2.

However, Chandler, speaking at Hitachi Capital Vehicle Solutions’ Customer Forum, said he is “hopeful that HMRC will just clarify that it doesn’t include company cars”.

“It might be that they’re just trying to catch ECO car schemes rather than conventional company cars, and it is unlikely to come to anything,” he said.

Chandler also warned companies about revised enforcement of van private use rules. While commuting and “insignificant” private mileage is allowable, companies’ behaviour regarding this has not been observed to date, so where private use of commercial vehicles is more than “insignificant”, HMRC could be unaware.

However, in recent developments, HMRC is currently contacting companies to determine whether there is any significant private use of company vans and have stated that they may require the restriction on private use to be actively enforced. Chandler added that this could mean firms demonstrating to HMRC that they are abiding by rules through tracking devices or mileage reporting. “This is not a change to the rules but a change to the principle of what HMRC is doing,” he said. “It could be problematic for the administration of van use.”

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