TaxPersonal TaxTreasury remains firm over company car taxation

Treasury remains firm over company car taxation

The Treasury has refused to move from a list price basis for company car taxation - despite Tory claims the term may lose meaning because of the government's own campaign against rip-off Britain.

Shadow Treasury minister Howard Flight warned during Finance Bill Committee debates in the Commons that the ‘worthy campaign’ would end list price as a meaningful guide to the true market value of a car.

He urged instead switching to the higher of the second hand value of the car or its actual cost to the employer.

Flight said: ‘Using the list price does not make sense as it is already virtually a concept of the past.’

But financial secretary Stephen Timms insisted list price is not about to be abolished and claimed its use was the only way of avoiding a significant regulatory burden on employers or inequities between employees.

He said relying on second hand value would require every car to be independently valued every year and result in variations across the country and values considerably less than those of brand new vehicles.

And he warned using the cost to the employers would be different tax treatment of employees with the same car depending on the discount deal their employers was able to negotiate with vehicle suppliers.

Flight warned that the Office of Fair Trading and Competition Commission ‘may deem list prices to be inappropriate’.

Timms also rejected a Tory protest that new rules abolishing the incentive for employees to increase their business mileage to secure less tax on private use will unfairly treat employees provided with cars as a perk and those who have to use them for business purposes the same.He insisted it was right to move to a system under which less tax would be due on more efficient cars.

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