Company car tax perk to return

I say this following the Chancellor's announcement in the PBR that Employees and Directors who are provided with an electric powered company car for their private use will pay no tax on the benefit from 2010/11 through to 2014/15.

There will also be no Class 1A National Insurance Contributions (NICs) on the taxable benefit of such company cars which must be propelled solely by electricity.

I admit I'm not a petrol-head but you'd have to be very keen on 'real' cars to choose to pay thousands of pounds of tax on a conventional company car or to run your own car when there's an option of a free to use company car - with no tax charged thereon.

And the absence of Employer National Insurance Charges will make the idea popular with employers too. Remember that the effective tax rate on high earners will be 50% next year and NI rates are going up too so the savings in prospect can be quite significant.

The range of electric cars available in the UK is growing all the time. Many currently have only 2 or 3 doors but Mondeo Man won't have to wait long for larger electric cars especially given the likely increase in demand after today's announcement. Earlier this year the Government announced that Motorists will be offered subsidies of up to £5,000 to encourage them to buy electric or plug-in hybrid cars.

I would admit that the potential attraction of electric cars is probably limited to those for whom a company car is a 'perk'. Electric cars currently have a limited range of less than 100 miles thus making them less than suitable for sales reps and others who drive long distances for business purposes.

This new facility to have a tax free company car, will need to be factored into the decision making process for businesses trying to decide which is the most attractive business structure going forwards. Other related PBR announcements include the deferral of the 1% increase in small companies rate of CT, forthcoming hikes in employer's NICs and the freezing of personal allowances.

Tax charge on parking spaces at your place of work

I seem to be experiencing deja vu all over again ;-)

In September 2007 the papers were full of reports along the lines that:

Commuters face a £350 tax on workplace parking spaces in an attempt to encourage them out of their cars and on to public transport.

Then in January 2008, much the same:

The Treasury is considering plans that will allow local authorities to levy a tax on companies with car parks.

And now, again:

Commuters could be taxed to park cars at work

The story remains pretty much the same in that Nottingham City Council aims to become the first authority to introduce the Workplace Parking Levy (WPL), with at least eight other councils ready to follow its lead. For each liable parking space, Nottingham City Council plans to charge an annual levy of £185, rising to £350 within four years of its planned implementation in 2010.

This all seems to stem from the Integrated Transport White paper that was published over ten years ago.

If memory serves however this would not be the first time that workers would be 'taxed' for driving to and from work.

A charge was introduced in the early 1980's I think but workplace parking was then exempted from taxation as a benefit in kind in the 1988 Budget, because it was deemed too difficult and complex for employers and the Inland Revenue to assess liability. Since then there has been no such charge.

Any payment or reimbursement of expenses in connection with the provision for, or use by, an employee of a car parking space at or near the employee’s workplace is not chargeable to tax. Equally the provision of workplace parking as a benefit, or by way of vouchers or credit tokens, is also exempt from tax. This is in stark contrast to the position as regards many other benefits provided by employers. In particular all other costs of traveling to and from work are treated as a taxable benefit if paid or reimbursed by an employer.

Before the last standard tax charge for workplace parking was implemented I recall dealing with a letter from (what was then) the Inland Revenue. The Inspector was arguing that the provision of a car parking space on office premises was a taxable benefit in kind. We responded that there was no cost to the employer in this regard but the Inspector argued to the contrary. His view was that rent and rates etc needed to be apportioned to arrive at the 'cost to the employer'. I recall that we didn't concede and that the introduction of a standard scale benefit charge was introduced shortly thereafter (and then abolished in 1988).

The element of this issue that always amused me may be apocryphal. Remember that senior officials of the Inland Revenue used to be allowed to park their cars at their Central London HQ in Somerset House. Could the potential imposition of a benefit in kind charge on those responsible for creating policy and enforcing the law have had an impact on their desire to avoid or abolish the benefit in kind charge on workplace parking? And what now of Local Council Officials? I suspect that times have changed and that different views will prevail. What about you?