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One of the most common questions I get asked is how to finance your leased car. You have a number of choices if you run your own business, less of a choice if you are employed and only have one option provided by the company – finance the vehicle yourself then recharge the company for your business mileage.

But for many of my clients it can be a dilema which the HMRC is about to complicate further if their proposed changes go ahead. We knew that they were looking into Salary Sacrifice schemes which can get very complicated because it allows employees to pay for their car out of gross income rather than what the rest of us do and pay out of income after tax and NI has been paid.

I wasn’t surprised when it was announced that the HMRC were looking into this as they not only miss out on employee tax and NI payments but also employer NI. However, because of the very complex recording and reporting of car usage it has only been viable for providers of salary sacrifice to make available to companies of over 100 employees. And with only 80 – 100,000 cars on such schemes it has not grabbed the attention of the guys in HMRC.

However, it now seems that the net is widening and the tax man is now looking at the way company owners, directors and employees finance their cars in an effort to raise more money. They have taken the view that the provision of a car allowance should be lumped into the investigation.

With the proposals potentially being included in the Autumn Statement 2016 we could see the new rules effective from April 2017 this is worrying for those receiving car allowances, especially if they have opted for an Ultra Low Emissions Vehicle (ULEV). If they had opted for a company car they could end up paying less tax than taking a car allowance. Very complicated but worth discussing with your accountant before making the decision. Once they have completed the consultation and finalised the rules I will let you know. By Graham Hill

For the first time in a decade the number of employees paying Benefit In Kind (BIK) tax has increased according to statistics released by HMRC for the years 2014/15. It may only be a 1% increase from 940,000 to 950,000 but it has all of the so called experts weighing in with opinions as to why this has happened.

Whilst Brexit is being flung around by a few they should reflect on the fact that these figures relate to 2014/15 when the referendum was but a glint in PM Cameron’s eye. In amongst the more believable reasons is that for the first time engine development has managed to pretty much keep pace with the increasing demands by the chancellor on BIK tax.

So whilst he has dropped the CO2 threshold year on year engines have become more efficient chucking out fewer CO2’s and therefore neutralising the effect on tax. Another view is that companies that had maybe reverted to car allowances, to allow employees to avoid benefit in car tax, or allowed employees to obtain their own cars, which they would drive for business and charge back company miles on the tax and NI free mileage rate, had moved back to company cars.

The reason for this move away from employee owned cars (known as the Grey Fleet) to company cars is not suggested to be financial but Health & Safety. Companies are responsible for the safety of cars driven by employees on company business, even when the cars are owned by the driver. So if an employee has an accident whilst driving on company business in his own car and the accident can be attributed to the car not being regularly serviced, the company is held responsible for the consequences.

Crazy but true. We are still nowhere near the peak of company owned cars of 1.16 million recorded in 2006/7 but the treasury must be pleased with this turn of events. They collected £1.9 billion from company car tax and NIC in 2014/15 so a nice little earner from them. Last time the number of company cars matched the current figure was 2011/12 when the tax and NI collected amounted to £1.66 billion.

This is as a result of tougher CO2 banding and of course the increase in cost of cars. Personally I continue to see a steady growth in the number of SME’s financing cars personally rather than through their business. Especially since the rates, provided by most leasing companies, are pretty much the same for business and personal applicants. By Graham Hill

I guess with the cost of diesel so high it was inevitable that people would try to save money by buying dodgy fuel that has either been bought cheaply, as it was intended for use by farmers, and as a result it attracts less duty or it has been stolen from farms where fuel is less protected than filling stations.

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According to HM Revenues and Customs the sale of illegal fuel is up by 48% and not just from ‘pop-up garages’ and ‘huckster sites’ but also regular filling stations. In the past it was easy enough to identify the dodgy fuel if it originated from a farm as it was dyed red. But to avoid detection the crooks have found a way to strip the red dye from the fuel using a concoction of chemicals.

This is all well and good but the chemicals they use can damage the engine. The damage is made difficult to detect as the effects of the chemicals can take months or even years to be noticed. HMRC has revealed that they found illegal fuel at 388 sites in 2012 compared to 262 in 2009/10.

Closed (Photo credit: Joe Dunckley)

Whilst is seems there has been a surge the HMRC believe that it has more to do with the detection rate rather than a substantial increase in use or theft of illegal fuel. You can draw your own conclusions, just be careful where you are buying your fuel from and what harm the fuel could be doing to your car. By Graham Hill

Related articles

• More garages caught selling illegal fuel (telegraph.feedsportal.com)

The Government has announced that it will not be adjusting the Approved Mileage Allowance Payments (AMAP) which are paid to 4 million employees who drive their own cars for work even though we have seen some swingeing increases in fuel costs since the rates were introduced at the current level 6 years ago. After a 12 month review HM Revenue and Customs announced that the rates would remain the same at Read more »