CIPD response to the HM Revenue and Customs discussion document
Charles Cotton, CIPD Adviser, Reward and Employment Conditions
Introduction
The CIPD is the professional body for all those involved in people management and development in the UK and Ireland, and has over 130,000 members. Our response is based on the input and feedback that we have received from a specialist panel of pay and benefit experts, representing organisations ranging in size from 10 employees to 17,000, many who have experience of operating company car schemes, ECOs, car allowances and AMAPs.
Our response
Linking AMAPs to CO2 emissions
While the Institute encourages initiatives to improve the UK and global environment, we believe that this proposal is not an effective way of achieving this. The CIPD does not support the proposal for the following reasons:
- As the proposal would affect all employees, not just car- eligible, there would be reluctance by some individuals, especially lower graded staff, to use their own cars for business journeys if the actual cost is not fully reimbursed, as for example the (illustrative) 25p per mile top rate for high CO2 vehicles would leave little towards the cars other running costs. Employer costs could rise as they have to start using hire cars and CO2 emissions would then be left in the hands of hire car providers.
- It would place an administrative burden on employers as they would have to use various payment rates for different cars. While this may be less of a problem for those with a car fleet or car allowances – as they should already have the appropriate records – it would be an imposition on those employers who reimburse the occasional business user as most do not routinely keep a record of the individual’s car type and CO2 emission.
- If individuals do not know what the CO2 emission of their vehicle is then they may not bother providing the information or provide incorrect information. Some individuals may be tempted to claim the highest mileage reimbursement rate and employers would not be able to easily check whether the rate is correct.
- There would also be the difficulty associated with employees changing their vehicle part way through the tax year when the cars are in different bands.
- Linking rates to the CO2 emission table for the taxation of company cars could mean that computer software may need to be changed on an annual basis, possibly causing ongoing technology costs for a number of employers.
- Artificially high mileage rates for low CO2 vehicles could lead to pressure on employers to pay the maximum rate and so the cost of such an "incentive" would fall on the employer. It would not be such an "incentive" if the employee had to claim tax relief. For example, if only 40p were continued to be paid by the employer, instead of the (illustrative) 50p rate, then on say 5,000 business miles the tax relief on the extra 10p would only amount to a credit of £110 (22% taxpayer) instead of being paid the extra £500 by the employer.
For these reasons, the CIPD also does not support the third scenario of linking CO2 emissions to amended AMAP rates and thresholds.
We believe that if HMRC wishes to encourage the driving of lower-CO2-emission-vehicles then this could be better achieved through differentiating bands of vehicle excise duty.
Amending the rates and thresholds
We are open to amending the rates in light of what it now reasonably costs to run a vehicle. However, the CIPD is against increasing the number of thresholds as this will only complicate the administration of AMAPs, especially for small employers.
While most of our members work for organisations that do not operate company car schemes, ECOs or car allowances, they do work for employers that use AMAPs to reimburse individuals who use their own vehicle for business purposes. This is why our members are concerned that the HMRC doesn't end up complicating these payments by needlessly amending the rates or the thresholds or penalise lower graded employees (such as those working in the care profession) who use their own vehicles for business purposes.
The CIPD would be happy to work with HMRC in this area.