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Clampdown on salary sacrifice company schemes

September 29, 2016

BVRLA puts the case for fleet to government consultation on perk used by motorists and employers to cut cost of financing a new vehicle.

The government is gearing up to limit salary sacrifice company car schemes next year.

The move aims to close the currently available oppertunity for employees and employeers to avoid paying National Insurance (NI) and tax on a range of products and services. Through the scheme employers allow staff to take a pay cut, but the money is placed into a pension or other benefit such as a company car scheme. Workers save on tax and both employees and companies save on NI.

But the government wants to curtail the practice, which costs the treasury up to £5 billion a year, and the clampdown could form part of the 2017 Finance Bill.

Such a move would hit the salary sacrifice section of the fleet market and the British Vehicle Rental and Leasing Association (BVRLA) has made a strong case for such schemes to receive special consideration during the government’s two-month consultation period that ended on 19 September.

BVRLA chief executive Gerry Keaney said: “These company car schemes offer a valuable way of rewarding and retaining staff, particularly for many public sector organisations that have had to struggle with long-term pay freezes.

“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. These vehicles provide a more sustainable alternative to the older, more polluting fleet cars that staff might otherwise use for business travel.”

The BVRLA argued that any future changes to the current taxing of salary sacrifice schemes for company-provided cars would need to be properly signposted so that employers and drivers are given at least three years’ notice and can plan accordingly.