Car Salary Sacrifice – Optional Remuneration Arrangements (“OpRA”)
Tusker have been working with our tax adviser EY to clarify the way in which the new Optional Remuneration Arrangements (OpRA) legislation should be applied to the provision of salary sacrifice cars.
Following a meeting with HMRC, HM Treasury and HMRC Policy, we are pleased to confirm that the treatment which Tusker and EY have applied since the publication of the Finance Bill is correct. The below explains that treatment and what it means in practice for our drivers.
The car benefit legislation taxes the private use of the car (S120 & S120A ITEPA 2003). Any additional benefits provided
with the car are not.
HMRC has agreed that with a car salary sacrifice arrangement there are separate and distinct benefits being provided – the car is one benefit, insurance is another benefit, maintenance is another etc.
HMRC Policy has agreed in writing that under OpRA for a car that is over 75g/km we only need to compare
- the salary sacrifice relating solely to the car (and not any of the other benefits); and
- the normal car benefit charge for the car (list price x CO2 percentage) to determine which of the two is the
“higher of” value – this higher of value then becomes the taxable benefit value for the car and is the benefit figure that
the employer pays Class 1A NIC on.
The salary sacrifice for any other benefits provided in connection with the salary sacrifice company car will continue not to be taxed as the S239 exemption applies equally to all company cars regardless of how they are provided.
The reason for this is that S239 is included in the list of exemptions that can continue to apply under OpRA – this includes pension, childcare, ULEVs, cycles.
The specific exemption in the legislation which means that there is no tax to pay where an employer provides any “other payments and benefits connected with taxable cars” a taxable car being a company car provided by the employer for an employee’s private use. S239 provides that any associated costs for benefits met by the employer in relation to the company car are not taxed – this includes maintenance, insurances, road fund licence year 2 onwards,breakdown cover, new tyres etc.
This was the case before and is still the case after the introduction of the OpRA legislation.
S239 specifically does not exempt the provision of private fuel and would not cover the cost of a chauffeur where separate benefit charges do arise.
In short, this means:
- The application of the Finance Bill rules should consider only the amount sacrificed for the car itself, and not for maintenance, tyres, roadside assistance etc.
- An employee who enters a car salary sacrifice agreement pays Benefit-in-Kind tax on the greater of the taxable value of the vehicle or the salary being sacrificed for the car
- Employers have to pay NI on the above amount, which means there are savings to be made for employers (which previously were thought to have been removed)
- Ultra-Low Emission Vehicles (those with emissions of 75g/km or less) are exempt from any tax changes