TaxPersonal TaxPitfalls in store for car tax

Pitfalls in store for car tax

As is now usual, the government is expecting businesses to deal with every aspect of the new company car tax regime. Accountants are not seeking to increase their workloads through 'talking up' the tax compliance burden of a difficult-to-implement tax, especially as those who look after PAYE systems will be at the sharp end of dealing with the compliance pitfalls of the CO2 based car benefits taxation from 2002.

It is true the Inland Revenue has commissioned the Society of Motor Manufacturers and Traders to prepare a comprehensive list of CO2 emissions for vehicles.

But there are concerns.

Firstly, the free database search is slow and users unfamiliar with cars will almost certainly make a mistake. There should be an alternative to the current ‘step by step’ search. This should allow the vehicle details from the V5 certificate to be entered directly.

Secondly, the full database will not be free. The ‘deluxe’ version is being sold for £900. There is little acknowledgement of the increased workload for businesses, especially non-computerised small businesses. They are more likely to own older vehicles and will need to work out exactly into which CO2 level their vehicles fall. In a recent letter to Accountancy Age the Revenue states that ‘the same sort of information as they already need to check’ will be required for the new system.

Currently only the list price, including extras, is required for the basic car benefit calculation.

Under the new regime, as the Revenue letter states, ‘the list price of the car, the fuel type (petrol or diesel), engine size and whether the car is an automatic (manual or CVT), as well as the make and model’ is required for the basic benefit calculation.

At this point, the Revenue will say, ‘But the employee will no longer have to keep mileage logs.’ My response is to enquire whether their PAYE auditors will be happy with businesses which do not enforce the keeping of logs to back up fuel reimbursements.

What seems to me to be the most unsatisfactory is that the Revenue says it ‘will be content’ if business gets the calculations wrong – if they can demonstrate that reasonable care was taken.

It may be ‘content’, but it does not state that it will not recalculate and collect underpayments. Neither has it said that it will not charge interest or penalties.

– Chas Roy-Chowdhury is head of taxation at ACCA.

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