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What will the Autumn Statement mean for Salary Sacrifice?

20161117_What will the autumn statement mean for salary sacrifice

Next week’s Autumn Statement will reveal many things: the fiscal priorities of the May Government; Philip Hammond’s commitment to his predecessor’s infrastructure policies; whether the Brexit vote has upset previous growth forecasts; and so on.

But, for those of us in the fleet industry, there will be another revelation of particular interest. According to the consultation document that HM Revenue and Customs launched a few months ago, the Autumn Statement will also disclose the Government’s new policy towards various Salary Sacrifice benefits – including cars.

This process actually began with George Osborne’s last Budget in March. That document highlighted the Government’s concern at the erosion of Income Tax and National Insurance revenues due to the recent growth of Salary Sacrifice schemes. Then came that consultation on 10 August, which sought views on a general proposal to tax Salary Sacrifice benefits as though they were income. It concluded last month.

We don’t yet know what the Government’s final decision will be, but our position – and that of the fleet industry – is unequivocal. Salary sacrifice car schemes are good for people, good for the economy and good for the environment. They shouldn’t be targeted.

Good for people

Salary Sacrifice schemes are a great reward for employees. It’s not just about making a new car affordable – although that’s part of it – it’s about what a new car means. Safety. Fuel efficiency. Lower running costs. A new car is, in many respects, an easier life for its driver. And it gets easier still. Because Salary Sacrifice cars are treated much like company cars, they come with maintenance, servicing and insurance included – with all the peace of mind that brings.

Good for the economy

Salary Sacrifice car schemes are an important tool for British companies to attract, motivate and retain the best staff. Salary Sacrifice car schemes have historically been tax negative for the Exchequer, however these have recently become tax positive (even without the implementation of the new rules). Why harm them? The Government already gains tax revenues from the BIK rates and National Insurance levies that are currently imposed on Salary Sacrifice cars. If they discourage such schemes, they might not only lose out on this, but also on the revenues that accrue from a thriving economy.

Good for the environment

As we’ve said, Salary Sacrifice enables employees to get newer cars – which also means greener cars. On average, new petrol cars emit 36 per cent less carbon dioxide than those from eight years ago. At a time when much transport is designed to lower emissions, it would be counterproductive for the Government to restrict something that does exactly that.

With all this in mind, what should the Government do now? At best, it should exempt cars from any changes to Salary Sacrifice, in the same way it has promised to do for other items, such as pension contributions and childcare vouchers. But if it’s not prepared to do that, there are compromise options: for instance, any new rules shouldn’t apply to employees who’ve already taken a car under Salary Sacrifice.

Whatever happens, we at Hitachi Capital Vehicle Solutions will keep you updated. Our experts will be analysing the Autumn Statement as Philip Hammond delivers it. Stay tuned to this blog for more.

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