Company cars
It is time to review your strategy
—
October 2019
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(“KPMG International”), a Swiss entity. All rights reserved.
With you today
Matthew Hunnybun
Partner, Employment Tax
KPMG in the UK
T: +44 (0)7742 108408
David Raistrick
Senior Manager
KPMG in the UK
T: +44 (0)161 6187371
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3© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Agenda
Policy
going
forward
Tax
— Significant changes in taxation
— New rules from April 2020
— OPRA
— Private use contributions
— Car or van
Cost
— Electric/hybrids versus
diesel/petrol
— Policies by reference to lease cost
— Business fuel cost – electric versus
diesel
Now to 2040
— No more new petrol and diesel
cars in the UK
— Investment in national
infrastructure
— Electric car development
— Cell/re-charge technology
Considerations
— Investment in electric/policy
change
— Salary sacrifice
— Cash
— Health and safety
— Employee communications
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4© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Tax from April 2020 Cars registered pre April 2020
FY 2019-20
%BIK Rate
FY 2020-21
%BIK Rate
FY 2021-22
%BIK Rate
FY 2022-23
%BIK Rate
Vehicle CO
(g/km)
Electric Range
(miles)
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
0 16 0 1 2
1-50 130+ 16 2 2 2
1-50 70-129 16 5 5 5
1-50 40-69 16 8 8 8
1-50 30-39 16 12 12 12
1-50 <30 16 14 14 14
51-54 19 15 15 15
55-59 19 16 16 16
60-64 19 17 17 17
65-69 19 18 18 18
70-74 19 19 19 19
Document Classification: KPMG Public
5© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Tax from April 2020 Cars registered pre April 2020
FY 2019-20
%BIK Rate
FY 2020-21
%BIK Rate
FY 2021-22
%BIK Rate
FY 2022-23
%BIK Rate
Vehicle CO2
(g/km)
Electric Range
(miles)
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
75-79 22 20 20 20
80-84 22 21 21 21
85-89 22 22 22 22
90-94 22 23 23 23
95-99 23 24 24 24
100-104 24 25 25 25
105-109 25 26 26 26
110-114 26 27 27 27
115-119 27 28 28 28
120-124 28 29 29 29
Etc.
Document Classification: KPMG Public
6© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Tax from April 2020 Cars registered post April 2020
FY 2021-22
%BIK Rate
FY 2020-21
%BIK Rate
FY 2022-23
%BIK Rate
Vehicle CO2
(g/km)
Electric Range
(miles)
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
0 0 1 2
1-50 130+ 0 1 2
1-50 70-129 3 4 5
1-50 40-69 6 7 8
1-50 30-39 10 11 12
1-50 <30 12 13 14
51-54 13 14 15
55-59 14 15 16
60-64 15 16 17
65-69 16 17 18
70-74 17 18 19
Document Classification: KPMG Public
7© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Tax from April 2020 Cars registered post April 2020
FY 2020-21
%BIK Rate
FY 2021-22
%BIK Rate
FY 2022-23
%BIK Rate
Vehicle CO2
(g/km)
Electric Range
(miles)
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
Petrol, Electric,
RDE2 Diesel
75-79 18 19 20
80-84 19 20 21
85-89 20 21 22
90-94 21 22 23
95-99 22 23 24
100-104 23 24 25
105-109 24 25 26
110-114 25 26 27
115-119 26 27 28
120-124 27 28 29
Etc.
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8© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Increase in tax
Tax on company cars has
increased significantly over
recent years which we have
demonstrated using the below
example:
VW Golf Diesel
List price: £30,000
CO2 = 110
2013/14CO2 % – 14% + 3% diesel sup.
BIK – £5,100
Tax at 40% – £2,040
Class 1A NIC charge = £704
2019/20CO2 % – 26% + 4% diesel sup.
BIK – £9,000
Tax at 40% – £3,600
Class 1A NIC charge = £1,242
76.5% increase in
cost over six years
Slightly above
inflation!!!!!
No great change
in C02s
© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated 9with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Impact of tax rules on electric carsIn order to try and promote the
uptake of electric vehicles, from
2020/21, the government has
significantly reduced the CO2%
on electric vehicles.
Tesla Model S
List price: £90,000
2019/20CO2 % – 16%
BIK – £14,400
Class 1A NIC = £1987
2020/21CO2 % – 0%
BIK – £0
Class 1A NIC – £0
2021/22CO2 % – 1%
BIK – £900
Class1A NIC – £124
Class 1A NIC saving for
employer = £1,987
Salary sacrifice saving on £1,070
per month of £450 per month or
£5,400 per annum
Tax saving for employee
(assuming HR) = £5,760
Salary sacrifice company saving
of £1,772 per annum
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10© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Optional remuneration arrangementsImpact on fleet policies
Employees taxed on
higher of cash versus
company car for non-
ULEVs
— Cash offered £6,000
— Car benefit on car of 90 g/km – 22% of £25,000 =£5,500
— Taxed on £6,000
Replacement of
cash with Mileage
Allowance
Payments
— Impact on employee car ownership schemes
— Impact on net miles arrangements
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11© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Other tax areas
Private use
contributions
— Does your policy satisfy section 144 ITEPA 2003
— Quigley case
— Brown V Ware
Car or van — Coca Cola case
- Kombi vans
- Vauxhall Vivaro
Is electric the way to go?Main factors for consideration:
Choice
Cost
Infrastructure
Efficiency of diesel
vehicles/individuals
annual mileage
© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Document Classification: KPMG Public
Document Classification: KPMG Public
13© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Choice – be ready for the revolution?Electric vehicle choice is currently viewed as limited by many businesses
In 2019, electric cars announcements include:
— Mini 3 dr hatch: 145 mile range, 80% charge in 35 minutes
— Porsche Taycan: circa 250 mile range, 0 to 60 – circa 3 seconds
— Volvo All Electric: XC40 – SUV
— Mercedes EQC: 250 mile range
— New KIA Nero: 282 mile range
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14© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
CostElectric vehicles are typically more expensive to purchase compared to their
diesel/fuel alternatives
— Electric Mini starting price: £24,400
— Petrol Mini starting price: £16,195
— VW E-Golf starting price: approx. £31,000
— Petrol Golf starting price: approx. £20,000
— Need to consider all costs including fuel and Class1A NIC
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15© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Case study – employer inclusion of vehiclesCar schemes are generally structured whereby individuals are
allowed cars up to a set annual lease price dependent upon grade.
However, as the below shows, electric cars which typically wouldn’t
be allowed due to the annual lease price do not work out more
expensive due to the tax savings which can be obtained.
Description P11D Co2 C02 %
Annual rental
based MPG Fuel type
Annual
Fuel Cost NI Ins
Total annual
cost
C-HR Hatchback 25100 86 22% £4,200 61 Petrol £1,782 £ 762 £800 £7,544
Focus Diesel Hatchback 21250 93 27% £3,850 60 Diesel £1,970 £792 £800 £7,412
VW Polo 19585 97 28% £4,000 60 Diesel £1,973 £757 £800 £7,530
VW Polo 17305 104 25% £3,500 45 Petrol £2,424 £597 £800 £7,321
Nissan Leaf Acenta 30135 0 0% £5,400 N/A Electric £800 £0 £800 £7,000
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16© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
InfrastructureThe government’s ‘Road to Zero’ strategy outlines how the government will support the transition to zero emission
cars. Some of the key plans are:
Home charging
Government’s aim that:
— New build properties will have a
charge point available – a consultation
surrounding making this a requirement
is due to be commissioned
— The Electric Vehicle Homecharge
Scheme (EVHS) will be continued
which provides grants to electric
vehicle drivers installing a charge point
— Everyone has access to a charging
point irrespective of the type of
property which they occupy (e.g.
terraced house or flat)
Government investment
— The ‘Road to Zero’ strategy involves
£1.5 billion of investment
— £40 million in a series of projects to
tackle the challenges of on street
charging
— An additional £2.5 million of funding to
install over 1,000 charge points
— £4.5 million grant funding has been
made available in respect of on street
residential parking. This has recently
been increased by additional £2.5
million
Private sector investment
— Oil companies are investing and
acquiring relevant businesses
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17© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Efficiency of diesel vehicles/employees annual mileage
If an employee does a significant amount of business mileage, an electric vehicle may not
currently be the right choice for them.
During long journeys, it may not be convenient for individuals to stop and re-charge their car,
especially if this needs to be done during working hours.
Additionally, given the efficiency of diesel vehicles (especially over long journeys), the high
MPG obtained may result in journeys in diesel vehicles being more cost efficient than hybrids.
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18© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Alternative options?Instead of providing a company car, an alternative option is to provide cash
to employees which they can use to take out a private lease
In the following example, an individual who is a 40% taxpayer currently
has a diesel as a company car:
Providing an individual with a company car
P11D value £30,000
CO2 g/km 120
Total CO2 percentage 33%
Taxable benefit £9,900
Cost to employee £3,960
Total employer annual cost including Class 1A NIC of £1,366 £7,000
Cash alternative £6,124
The total cost to the employer of providing the company car or cash is £7,000
Document Classification: KPMG Public
19© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Alternative options?Providing an individual with cash
Annual cost for car including personal lease, maintenance, insurance and RFL £6,250
Advisory Fuel Rate relief (based upon the individual doing 10,000 business miles and fuel being
reimbursed at 0.12 per mile)
£1,320
Company car tax saved £3,960
Net cash required £970
Cost to company of providing cash £1,912
The total saving to the employer is over £5,000 if they were to give the employee the level required to
afford the same car
Shared savings?
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20© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Cash alternativesOther considerations
Significant changes for
employees – particularly
business needs drivers
Employee communications
are critical
— Do employees understand
their tax code?
— Do employees look at their
P11Ds?
— Education required on how
much tax they are paying
Health and safety
— Car restrictions
— Age and mileage
— Insurance
— Servicing/maintenance
— Spot checks
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21© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
Cash alternativesOther Considerations What else do you offer:
Personal leasing/
contract purchase
— Considerable care required
as company car?
— Apollo Fuels case
Credit sale agreement
— Ownership passes on day one
– no company car
— Other potential benefits
you could provide
— Employee communications are
important
Salary sacrifice
— Perfect for electric cars
— Also savings for ULEVs
— Perk drivers only or how do
you incorporate high fuel
costs?
— No OPRA for ULEVs
Salary sacrifice illustration for 2020/21Tesla – Model 3
Personal lease/finance/maintenance/insurance £7,200
Company cost of car lease/maintenance/insurance £7,100
Employee salary sacrifice £7,100
Cost to employee £4,118
Company car tax £0
Employee Saving £3,082
Employer Saving £1,015
Overall combined saving £4,097
© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with
(“KPMG International”), a Swiss entity. All rights reserved.
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23© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
How should your policy look?
Policy
Move to cash alternative
— Financial analysis
— Health and safety
— Link to credit sale providers
Vehicle choice
— More electrics/hybrids
— Independent financial analysis
— Charging point grants/costs
Salary sacrifice
— Significant savings for employees
— Financial analysis
— Feasibility study
HMRC
— Private use contributions
— What is a company car
— Charging points/mileage
— Clearance applications
Questions and thank you
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