The measure

The Autumn Statement contained two proposals on company cars. The first is to ensure that only payments made in the relevant tax year can be treated as being for private use of a company car. The second is to ensure that cars provided to employees under a lease from their employer are treated as a company car for tax purposes. Both measures are in response to two tax cases that found in favour of the taxpayer on the above points.

The draft legislation is expected to be released next week.

Who will be affected?

The new proposal on the timing of payments for private use of a company car will affect all employers, and their employees, which allow private use contributions for a company car for one tax year to be paid in a later tax year.

Employers providing cars under a lease to employees is not common and is mainly confined to employers who provide cars to other businesses and the public as part of their normal business.


These rules are expected to take effect from 6 April 2014.

Our view

Both measures are in response to findings in favour of the taxpayer at a tax tribunal. The Government is seeking to stop employees paying contributions toward a company car that will reduce their tax bill well after the end of the tax year. We expect HMRC may allow contributions that are paid shortly after a relevant tax year if this is due an administrative timing issue or error.

The Tribunal's decision that a car leased by an employer to an employee is not treated as a company car went against established practice. The proposal will ensure that such arrangements will always lead to the car provided being treated as a company car for tax and NIC purposes. This second proposal is presumably intended to prevent employers who do not provide cars as part of their normal business, as well as those that do, leasing cars to their employees to remove the company car benefit tax for employees and the NIC on the benefit for the employer.

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