KPMG Employer s Club webinar Company Cars...2013/14 CO2 % –14% + 3% diesel sup. BIK –£5,100 Tax at 40% –£2,040 Class 1A NIC charge = £704 2019/20 CO2 % –26% + 4% diesel

Company cars

It is time to review your strategy

—

October 2019

Document Classification: KPMG Public

2© 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.

With you today

Matthew Hunnybun

Partner, Employment Tax

KPMG in the UK

E: [email protected]

T: +44 (0)7742 108408

David Raistrick

Senior Manager

KPMG in the UK

E: [email protected]

T: +44 (0)161 6187371

mailto:[email protected]

mailto:[email protected]




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




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




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.




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




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.


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.


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




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




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






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




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




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




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




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.




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




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?




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




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 Cooperative 22




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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or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is

accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without

appropriate professional advice after a thorough examination of the particular situation.

© 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.

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Documents

KPMG Employer s Club webinar Company Cars...2013/14 CO2 % –14% + 3% diesel sup. BIK –£5,100 Tax at 40% –£2,040 Class 1A NIC charge = £704 2019/20 CO2 % –26% + 4% diesel