Operational Remuneration Arrangements (OPRA)
Do your employees currently have a company car through salary sacrifice or instead of a cash allowance? You could be impacted by rules which came into effect in April 2017.
Questions you may have:
- How do I know if my salary sacrifice scheme is affected?
- What is the effect of these changes on my salary sacrifice scheme?
- Is my salary salary sacrifice scheme still viable ?
How does it work?
These are all areas to consider and where we can look to help. Please read the information provided below as a guide but if you have more specific questions then please reach out and letstalk.
Where employees select a company car via either a salary sacrifice arrangement or instead of a cash allowance (where they have that choice), then new rules, which came into effect from 6 April 2017, may affect the calculation of company car benefit. These new rules do not affect cars with CO2 emissions of 75 g/km and below.
Where an employee enters into an Optional Remuneration Arrangement for a car before 6 April 2017 (which includes where a car is ordered, but not delivered, prior to this date), then the existing calculation described above stands, until a variation of that arrangement or its expiry.
Where employees entered into new arrangements on or after 6 April 2017, then their company car benefit will equal the greater of :
(i) the amount as calculated under standard company vehicle BIK , and
(ii) the gross salary sacrifice / gross cash allowance forgone*.
After you have determined the greater value of (i) & (ii) above, deduct
(i) Contributions made by the emplyee for the private use of the car; and
(ii) Capital Contributions by the emplyee multiplied by the apprpriate percentage based on the CO2 emmisions
* The amount of earnings forgone in a company car arrangment is the gross salary sacrifice value/ cash alternative for your related grade.
The information provided is based on existing and proposed legislation as at March 2020 (11th March 2020 UK Budget). Whilst every effort has been made to ensure that information given is accurate and not misleading, this information is intended to provide a quick reference to the current tax regulations relating to company vehicles and how they impact employers and employees. The content has been provided for informational purposes only and should not be relied on as a substitute for professional advice. No responsibility can be accepted by LetsTalkFleet Ltd for any loss or liability occasioned by any person acting on or refraining from action as a result of viewing this information.