Finance Bill: What it means for fleets

Transcription

1 Finance Bill: What it means for fleets

2 Finance Bill: What it means for Fleets Key policies The Government has recently published the Finance (No. 2) Bill the piece of legislation that will bring tax changes from Autumn Statement 2016 and Spring Budget 2017 into effect. It contains a number of policies that will be of interest to fleet professionals: 1. The changes to optional remuneration schemes that will apply from 6 April The new system of Company Car Tax that will come into effect in The Vehicle Excise Duty rates from April The first-year capital allowance for electric charge points. 5. The rise in Insurance Premium Tax. These policies are discussed in further detail below. Other tax policies aren t contained within the latest Finance Bill, for various reasons. Among them is the Chancellor s continuing freeze to Fuel Duty, even though it was announced in Autumn Statement 2016, because the rates set in Finance Act 2013 simply continue into the future Optional remuneration arrangements The most significant section of the Finance Bill for fleet professionals is Schedule 2. This brings in the changes to optional remuneration schemes that were first mooted by George Osborne and then consulted on last year, before being announced by Hammond in Autumn Statement Optional remuneration includes both Salary Sacrifice and cash alternative schemes. As of 6 April 2017, any cars gained through such arrangements will be subject to Income Tax and employers National Insurance Contributions. These will be charged on the greater of the amount of salary sacrificed or the taxable benefit of the car. Ultra-Low Emission Vehicles (ULEVs) those emitting 75kg/km and under are exempt from the changes entirely. The policy will be grandfathered so that the changes will not apply to existing car schemes i.e. those entered into before 6 April 2017 until April However, the Finance Bill confirms that existing schemes that are varied or renewed after 6 April 2017 will be subject to the new system, with allowances made for certain types of variation, such as accidental damage. Salary Sacrifice will be a sensible option for many employees - especially basicrate taxpayers and those choosing ULEVs. Besides, Salary Sacrifice has many benefits beyond tax. It enables motorists to get a newer, cleaner car for a fair monthly price that also includes essentials such as maintenance, servicing and insurance. However, depending on their particular needs, some employees may find that alternative arrangements - such as leases based on a net Salary deduction or credit sale agreements - are now more appropriate. All employers need to actively review the benefits they offer their employees. We are working with all our customers to do this now. 1

3 1.2. What does this mean for Approved Mileage Allowance Payments? The Finance Bill provided some clarification on how the changes to operational remuneration will affect Approved Mileage Allowance Payments (AMAPs). AMAPs that are not part of an optional remuneration package i.e. those made as a standalone reimbursement of business mileage will not be affected. They will still not be subject to any tax.. We believe that, from after 6 April 2017, employers should suspend new orders where any confusion arises. We are working with our in-house tax advisors and industry experts to gain further clarification on these changes from HMRC. In any case, employee benefit packages will need to be revised to ensure they are in line with this new legislation. Their specific wording may be more important than before. We are currently adapting our propositions to optimise them for the new tax landscape. We encourage our customers to call us about what it all means for them. However, AMAPs paid as part of an optional remuneration package that is, where an employee agrees to give up part of either their salary or a cash allowance in return for reimbursement of additional mileage expenses will now be subject to both Income Tax and employers National Insurance Contributions. It is still unclear how this policy will affect AMAPs that are part of an employer-mandated remuneration policy. This rests on whether optional remuneration requires choice on the part of the employee the Government needs to provide further clarity about this. 2

4 Appropriate percentages for Company Car Tax, to Company Car Tax Previous Budgets and Autumn Statements revealed the Benefit-In- Kind rates for company cars up until As the above table shows, they are rising rapidly. For example, a petrol car emitting 100g CO2/km will see its appropriate percentage rise from 17% in to 24% in The new CCT system that comes into force in will provide welcome incentives for ULEVs. However, its disappointing that, under the current system, CCT rates for ULEVs will rise between now and 2020, even faster than those for other cars. This may slow the progress that is being made towards greener motoring. Autumn Statement 2016 reformed Company Car Tax (CCT), and the Finance Bill sets out the new rates that will apply in The aim is to further incentivise the uptake of cleaner cars. For example, zeroemission cars will face a 2% rate in that year, down from 7% now. The full suite of rates is shown in the table above. It s also disappointing that the Government hasn t yet revealed the CCT rates for ; particularly given that many organisations operate four-year leases, and will want certainty about the years ahead. We expect to see these rates in this year s Autumn Budget. 3

5 3. Vehicle Excise Duty A new system of Vehicle Excise Duty will come into force on 1 April 2017, and will apply to cars registered on or after that date. However, this new system isn t mentioned within the latest Finance Bill because it was announced in Summer Budget 2015 and subsequently confirmed in the Finance (No. 2) Act The latest Finance Bill did, though, contain new VED rates for cars registered before April 2017, for which the existing system still applies. VED rates will increase by 5 for cars emitting between 121 and 165g CO2/ km; by 10 for those emitting between 166 and 225g CO2/km; and by 20 for those emitting more than 225g CO2/ km. They will also rise by 10 for higher-emission vans. In his recent Spring Budget speech, the Chancellor said that VED rates would be frozen this year for HGVs, as would the Road User Levy. Neither of these policies is in the Finance Bill again, because they do not change any existing tax rates. 4. Electric charge points The Finance Bill introduces a new 100% First-Year Allowance, giving businesses tax relief on charging points for electric vehicles. This has been in effect from 23 November 2016, and will apply until April As more motorists go green, more and more businesses will need to provide charge points. This allowance will help with that, and is therefore good news. Now leasing companies and fleets need to make charging solutions a part of their company car policies. 5. Insurance Premium Tax The standard rate of Insurance Premium Tax will rise from 10% to 12% on 1 June 2017, as announced in Autumn Statement This comes on top of increases announced by Osborne in his last two Budgets, and means that the rate will have doubled from the 6% it stood at in Although it is a tax on insurance companies, this measure will push up premiums - including for car insurance - as insurers pass on the increased cost to their customers. How Hitachi Capital Vehicle Solutions can help The latest Finance Bill introduces a number of significant changes for fleets, on top of wider economic forces that range from Brexit to the cost of petrol. Not only do fleet operators and drivers need to stay up-to-date with these changes, they also need to review their existing arrangements to ensure that everything is still optimal. Particular attention ought to be paid to employee benefit schemes. Fortunately, Hitachi Capital Vehicle Solutions consultants are on hand to deal with your concerns. We understand that change can be daunting, but it can also be an exciting opportunity. Our expertise can help you to thrive in the years ahead. 4

6 Hitachi Capital Vehicle Solutions is one of the UK s leading specialist companies in the fleet leasing industry. We work with individuals and businesses across virtually every sector, developing innovative solutions for fleet operators and drivers of cars, vans, HGVs and specialist assets. With a fleet of over 70,000 vehicles, 25 years experience and the widest range of vehicle solutions in the market, we have unrivalled insights on the future of fleet finance, management and optimisation in the UK and into the future. Speak to our policy expert Suzanne Phillips National Fleet Consultant Hitachi Capital Vehicle Solutions consultancy_team@hitachicapital.co.uk Suzanne Phillips is National Fleet Consultant at Hitachi Capital Vehicle Solutions. A qualified accountant with over 11 years fleet experience, her role includes portfolio evaluation, business strategy development, and consultancy in areas such as funding and taxation. Share this us Find out more For more information on this and any other topic covered by the Hitachi Capital Vehicle Solutions Fleet Insider papers and resources, please visit: All images subject to copyright. The views expressed in this fact sheet are those of Hitachi Capital. Whilst every effort has been made to ensure the accuracy of the information given, you are advised to ensure that the content is accurate and up to date. Hitachi Capital cannot be held responsible for any claims arising from actions taken as a result of information taken from this fact sheet. Hitachi Capital Vehicle Solutions is a division of Hitachi Capital (UK) PLC. Registered in Cardiff no Registered Office: Hitachi Capital House, Thorpe Road, Staines-upon-Thames, Surrey TW18 3HP. Hitachi Capital (UK) PLC is authorised and regulated by the Financial Conduct Authority for Consumer Credit activity. 5