Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN51 Double Counting Of Car/Car fuel Benefits: legislating ESC A104

Who is likely to be affected?

1   Employees earning less than 8,500 per year who are provided with car and fuel benefits financed via an employer's credit card or voucher.

General description of the measure

2   Extra Statutory Concession (ESC) A104 will be brought into legislation by Finance Bill 2007.

3   ESC A104 was introduced in July 2004 to remove an anomaly whereby an employee earning less than 8,500 could incur a double tax charge where they are provided with car and car fuel benefits via an employer's credit card or voucher.

Operative date

4   The measure will have effect on and after 6 April 2007.

Current law and proposed revisions

5   The rules for calculating car and car fuel benefit charges are in Chapter 6 of Part 3 Income Tax (Earnings & Pensions) Act 2003 (ITEPA), but provisions in sections 239 and 269 of ITEPA prevent a double tax charge on employees earning 8,500 or more where car or car fuel benefits are provided via a credit token (e.g. a credit card) or non-cash voucher (e.g. a cheque) from the employer. This means that only the car and/or the car fuel charge will apply.

6   Most benefits in kind are not taxable on employees whose total earnings, including benefits, are less than 8,500 per year. However, a few benefits, notably credit tokens and non-cash vouchers, are taxable on all employees regardless of the level of their earnings. To determine the level of an employee's earnings relative to the 8,500 threshold, the rules in section 219 of ITEPA 2003 require all benefits and expenses provided to an employee to be included in the calculation. If a benefit relates to a car and/or car fuel provided to an employee by a non-cash voucher or credit-token, both the amount of the car/fuel benefit and the benefit of the use of the voucher/credit card for expenditure on the car/fuel, must be included as separate items in the calculation of the employee's total earnings up to 8,500. Consequently, double counting of the benefit could result in an employee (who would be otherwise below the 8,500 limit) being subject to double tax, once on the credit card amounts and again under the car car/fuel benefits charges.

7   ESC A104 was introduced to put an employee earning less than 8,500, who receives car/car fuel benefits, and uses their employer's credit card, on the same footing as someone earning at or above this figure. This legislation will achieve the same effect as ESC A104 by repealing sections 219 (5) and (6) of ITEPA.

Further advice

8   If you have any questions about this change, please contact the Employer Helpline on 0845 7143 143. Information about Budget measures is available on the HM Revenue & Customs website at