Changes to the taxation of
Company
Cars
|
Changes to the taxation of |
|
|
There are significant changes to the basis by which company cars are to be taxed effective April 2002. The administration of these changes is already having an impact on payroll administration. The changes will have a significant impact on both employees income tax and employers National Insurance contributions. In many cases the changes will result in an increased liability.
| Training Course . . . | |
Payroll Check Ltd
has investigated the impact of these changes and has
developed a half-day training course to explain the
changes and to help employers provide information to
their employees. |
|
| Software . . . | |
| We have negotiated a special price with the PTP Group for their "Company
Car Planner" software. This software assists with
the calculation of the tax liabilities (for employee and
employer), and compares this with other options (purchase,
lease etc) | Download further info [pdf file] | |
|
| Background Information . . . | |
| Inland Revenue: Draft
regulations for comment National Insurance contributions (NICs) on mileage allowance and passenger payments Introduction During debate in Finance Bill Standing Committee the then Financial Secretary Stephen Timms explained that the Government aims, as far as possible, to achieve the same treatment for NICs as for tax on payments that employees receive for using their own cars for business journeys. The draft regulations, which amend the Social Security (Contribution) Regulations 2001, provide alignment for NICs with the new statutory tax free approved mileage rates and the 10,000 miles breakpoint introduced in the 2001 Finance Act. They also include alignment with the new 5p per mile passenger rate. A technical amendment is also included to regularise the liability for NICs on fuel provided for use in a company car. Approved mileage allowance payments The regulations provide that mileage allowance payments which an employer pays to employees who use their own cars for business travel, are disregarded from earnings on which Class 1 NICs are due so long as they do not exceed the approved rates set out for income tax purposes in Schedule 12AA to the Income and Corporation Taxes Acts 1988 (ICTA 1988). These regulations place on a statutory basis the previous administrative arrangements applied to NICs of using the Inland Revenue’s authorised mileage rates as a means of identifying whether a NICs liability arises on mileage allowances. They also introduce for NICs the 10,000 business miles breakpoint. This means that employers will need to keep sufficient records of the mileage payments made to their employees to enable them to identify when the lower mileage rate needs to be applied to the NICs calculation. Passenger payments The regulations allow an employer to pay up to 5p per mile to an employee for carrying a passenger without incurring a NICs liability. The passenger must be an employee for whom the travel is business travel. The regulations also disregard from earnings for Class 1 NICs purposes payments in respect of car fuel which are provided for use in a company car and on which a charge to income tax under section 158 of ICTA 1988 arises. The amendment confirms the current Class 1A NICs liability on these payments. The regulations will come into force from 6 April 2002. |
|
| Information also available from . . . | |
| Inland Revenue Society of Motor Manufacturers and Traders (SMMT) CO2 Emission Details from SMMT Vehicle Certification Agency DVLA - info on Vehicle Excise Duty |
|
| Payroll Check Home Page | Payroll Training Pages | Pensions Check Home Page |
| Payroll Links | Payroll News by Email |