Do your employees currently have a company car through salary sacrifice or instead of a cash allowance? You could be impacted by these new rules effective April 2017.
Questions you may have:
- How do I know if my salary sacrifice scheme is affected post April 17?
- 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 come 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 enter 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.