1977: The Car – Silverstein

Car Benefit Scheme Warning

If you are a business owner or executive with a company car and a salary sacrifice scheme, it seems that life may get a little more complicated and probably more expensive. The online accountancy media are suggesting that those with salary sacrifice and company car schemes are going to get more expensive due to a European Court of Justice ruling. This is due to VAT which employees have had to pay on non-cash goods provided by employers in exchange for income, a service, which is VAT liable. This has been the case since January 2012.

The ECJ basically ruled in agreement with HMRC that the salary sacrificed is a supply of services in return for payment and therefore subject to VAT. This careful fine twist in the rules has wider implications for any salary sacrifice scheme. You should certainly take this matter up with your Accountant and I would urge you to read the HMRC guidance which you can find here.

Nobody should be under any illusion that HMRC is a soft touch, the Coalition Government are very clear that all tax must be properly collected and HMRC must deliver results and effective measures to ensure that this happens. Whilst there are advisers and accountants that will always push at the edges of tax avoidance into evasion, you need to be clear that tax evasion can carry serious penalties, including a custodial sentence. Whilst we assist clients reduce tax and plan appropriately to do so, it is important that such actions do not contravene the law or the direction of the law.