Company car tax and HMRC losing out

[jonwm]

Afternoon all

Just a thought I've been having combined with speaking to a few people of late re company cars and HMRC.

Firstly surely HMRC are losing out due to the way they have over the last few years hammered car and fuel BIK, working in sales and having a company car since 2003 I can really see the increase in tax payable, but at a conference the other week literally 50% of colleagues now opt out and receive the allowance instead, they are getting huge payouts from HMRC at the end of the year for the difference between paid mileage and that of the HMRC allowance, surely if they kept the BIK reasonable they would be be seeing more revenue?

Just a random thought, no science behind the thought

[Muzzer79]

I am not an accountant, nor have I done sums, but I would have thought that what they're losing out on charging BIK, they're making at least some or all back on charging income tax/NI on the car allowance you receive instead?

[Eric Mc]

Taxation policies are not just used to raise money for the exchequer. They are also used to encourage or discourage people and/or businesses from behaving in a certain way.

[Squiddly Diddly]

How huge are these payment from HMRC?

[jonwm]

Squiddly Diddly said:

How huge are these payment from HMRC?

Maybe huge was not the correct word to use, he said he had got £3.5k from the revenue when he did his self assessment, Car allowance at my place is either £5000 or £6000 depending upon grade and he had an F Pace R sport 2.0d previous to opting out, said he was paying circa £360 a month for the car and nearly £200 for fuel benefit in BIK.

Eric Mc said:

Taxation policies are not just used to raise money for the exchequer. They are also used to encourage or discourage people and/or businesses from behaving in a certain way.

True, not thought of it in that way.

Muzzer79 said:

I am not an accountant, nor have I done sums, but I would have thought that what they're losing out on charging BIK, they're making at least some or all back on charging income tax/NI on the car allowance you receive instead?

With my very rough man maths the guy i was talking to with the F pace would be paying 40% on £6000 extra salary so HMRC would be getting much less and giving him £3.5k back

[Ecosseven]

I received a promotion at the start of 2018 and my new role came with the option of a company car or an allowance. If we take the car then we have to keep it for 4 years or 80,000 miles. The cost of taking the company car was crazy. Something like £28-30k over 4 years with nothing to show for it at the end.

Luckily for me there are no restrictions of age or type of vehicle (other than it must be 'appropriate for work purposes - so no Elises or Caterhams, although 2+2 coupes seem be OK) if you take the allowance instead. Needless to say I took the allowance and continued to run my Seat Leon.

[bogie]

Company cars were rarely much of a benefit in the last 10 years (or more) unless you took something in a very low tax band and did >20k business miles a year.

.....but then these days company cars are meant to be for "essential users" rather than a perk. long gone are the days when you could get 2 company cars with an exec job, because it was a cheap way for companies to give employees bonuses

Getting tax rebates is common in the first year of going from business co car user to private car. Then HMRC will build your business mileage into the tax code (unless you notify them) and you dont notice it so much. I think people get used to having a low tax code for many years from company car usage, often its only when they have to lose it and change back, they realise just how much that new car every 3 years was costing them...