Legislation will be introduced to restrict the existing tax exemption for workplace canteens. However this will only affect employees and employers who use the exemption in conjunction with salary sacrifice or flexible benefit arrangements.
These arrangements allowed some employees to purchase canteen meals out of gross pay and hence obtain a significant tax advantage over the majority of employees who purchase meals using their net pay.
The legislation will not affect canteen subsidies that are available to all employees. This will take effect from 6 April 2011.
From 6 April 2012 the CO2 emissions bands used to work out the taxable benefit for an employee who has the use of a company car will be shifted down by 5gm CO2 per km. In addition, the current graduated table of company car tax bands will be extended down to a 10% band. This will mean that a 10% band will apply to company cars with CO2 emissions up to 99gm CO2 per km.
As a result ‘qualifying low emissions cars’ will no longer exist as a separate category.
Whilst a welcome move there are very few cars that might appeal to company car drivers that fall into this new band.
Changes to fuel benefit tax
From 6 April 2010 employees who receive free private fuel from their employers for company cars or vans will pay more income tax on this benefit.
For company car drivers the existing figure used as the basis for calculating the benefit will be increased from £16,900 to £18,000. For company van drivers the benefit will be increased from £500 to £550.
As a result of these increases employers will suffer additional Class 1A National Insurance Contributions.
Electric cars and vans
Employees who are provided with a company car for their private use, which is propelled solely by electricity, currently pay tax on the benefit which is based on 9% of the list price of the car. From 6 April 2010 this percentage will be reduced to 0% therefore reducing the benefit calculation and tax liability to nil. This will apply for five years.
In a similar vein, employees who are provided with a company van for their private use, which is propelled solely by electricity, currently pay tax on a flat rate benefit of £3,000. From 6 April 2010 this benefit will be reduced to nil thereby eliminating the tax liability. This will also apply for five years.
As a result of these changes employers will eliminate their Class 1A National Insurance liabilities on cars and vans provided to employees this way.