COMPANY CAR DRIVERS POTENTIALLY FACE BACK TAX DEMAND CAUSED BY NEW OpRA RULES, FIAG WORKSHOP TOLD
- Courts “get tough” on companies and individuals guilty of health and safety breaches
- Employers urged to relieve driver stress to improve road safety performance
- Businesses “nowhere near” maximising the potential of telematics technology
Company car-driving employees have been warned that they could be subjected to demands for back tax from HM Revenue and Customs following this year’s introduction of complex Optional Remuneration Arrangements (OpRA) rules.
The Fleet Industry Advisory Group’s (FIAG) autumn workshop, ‘Fleet Policy – Challenges and Influences’ heard Activa Contracts’ sales and marketing director Lisa Temperton highlight that understanding and correctly interpreting OpRA regulations was one of the “major challenges” currently facing businesses.
Essentially the new rules were introduced by government to mean employees opting for a salary sacrifice arrangement or taking a company car in lieu of a cash alternative paid tax on the higher of the existing company car benefit value and the salary sacrificed or cash allowance given up. However, car arrangements in place before April 6, 2017 are protected until April 2021 and ultra-low emission vehicles (ULEVs) – currently those with CO2 emissions of 75g/km or less – are exempt from the regulation.
OpRA rules were rapidly introduced on April 6, following confirmation in last year’s autumn Budget and subsequent Finance Bill, but the impact of the changes are still coming to light. For example, it was recently revealed that the new OpRA rules should only take into account the amount of salary sacrificed for the car itself thereby excluding vehicle maintenance, insurance, new tyres and roadside breakdown and recovery for example. That means that the finance rental for a car and all other costs should be separated out making so-called “proportionality” now an issue for employers in respect of OpRA.
Ms Temperton told delegates at the workshop, which was sponsored by driver risk management specialist Automotional and held at the company’s Training Centre located within the Formula E Paddock at Donington Park Race Circuit, that when P46 (Car) forms were sent to HMRC by employers at the end of the 2017/18 tax year they could be incorrect.
“Some employees will have underpaid tax and that will cause pain as HMRC looks to recoup the tax they believe due,” said Ms Temperton, who highlighted that underpayment was likely to be caused because company payroll departments were not yet set up to handle the impact of OpRA rules on tax.
Ms Temperton took delegates on a whistle-stop tour through “50 years of political meddling with the company car” and concluded that other “current challenges” facing fleet decision-makers included:
- The introduction of the new vehicle emissions and MPG test procedure, known as the Worldwide harmonised Light vehicles Test Procedure (WLTP)
- “Anti-diesel” vehicle legislation including the introduction of Clean Air Zones in towns and cities nationwide
- The impact of the new lease accounting standard, known as IFRS 16, effective from January 1, 2019, which in the fleet operating and vehicle leasing sector is mainly focused on its requirement for assets financed via operating lease – contract hire – to be brought on-balance sheet
- Increasing demand for personal contract hire affinity schemes
- Getting to grips with a raft of issues surrounding ‘connected cars’ and autonomous vehicles
- The fall-out from negotiations relating to the UK’s exit from the European Union.
However, Ms Temperton concluded: “Reports of the death of the company car are greatly exaggerated. The more it changes, the more it stays the same.”
That presentation introduced a roundtable debate among delegates on the future of the company car and fleet decision-makers agreed that there was perhaps “more uncertainty” than in living memory.
Some delegates concluded that growing company car benefit-in-kind tax complexity added to demands by employees “not to be dictated to in terms of vehicle choice” could prompt a move away from ‘perk’ company cars.
However, amid such a scenario some delegates warned that could trigger the increased use of privately-owned cars – the so-called ‘grey fleet’ – being driven on business journeys, which, in many cases, was already proving to be a corporate challenge in terms of managing vehicle documentation and driver licence validation to ensure duty of care compliance. An alternative, to growing ‘grey fleet’ use, it was suggested, was a greater use of hire cars and even pool vehicles.
Meanwhile, other workshop delegates suggested that company cars continued to deliver “value for money” to employees and there would be no shrinkage in demand.
Delegates also suggested that job-need cars remained business-critical and, against a background of year-on-year increases in company car benefit-in-kind tax, required “more government support”.
Courts “get tough” on companies and individuals guilty of health and safety breaches
Company directors and senior managers inside businesses with fleet responsibility are increasingly likely to be prosecuted with organisations potentially facing fines running into millions of pounds in the event of fatal and non-fatal crashes.
FIAG workshop delegates heard specialist health and safety lawyer Michael Appleby, partner at London-based Fisher Scoggins Waters LLP, highlight the impact that the 2016 sentencing guidelines for health and safety and corporate manslaughter offences were having on organisations, directors and senior managers.
The guidelines were introduced by the Sentencing Council last year and provide for a sliding scale of financial penalties linked to the turnover of a business and level of culpability.
For health and safety offences the scale of penalties is: large organisation with £50 million-plus turnover £3,000-£10 million; medium size organisations with £10-£50 million turnover £1,000-£4 million; small organisations with £2-10 million turnover £100-£1.6 million; micro companies with not more than £2 million turnover £50-£450,000. Convicted individuals face a maximum sentence of up to two years jail and an unlimited fine.
For companies convicted of corporate manslaughter the maximum penalty is an unlimited fine although the guidelines state a range of £180,000-£20 million depending on the size of the company.
Mr Appleby revealed that in 2015 just three companies were hit with fines of more than £1 million for breaching health and safety regulations, but that had risen to 19 in 2016 following introduction of the guidelines with two-thirds of cases being non-fatal. Historically, he highlighted, that fines above £1 million were reserved for companies prosecuted following fatalities.
He also highlighted a dramatic increase in the number of directors and senior managers being prosecuted – up from 15 in 2015 to 46 last year. What’s more, following introduction of the new guidelines, those found guilty were now likely to receive, as a minimum, a suspended prison sentence with directors also disqualified from holding office.
Mr Appleby told delegates: “There is an increasing interest by the Health and Safety Executive (HSE) in all area of occupational health including work-related road safety. Businesses should focus on reducing potential areas of harm across the workplace, which includes managing vehicle and driver safety. Inside many organisations there is scant attention being paid to fleet safety, which is a huge area of concern. Policies and procedures must be in place to reduce the risk of exposure to prosecution of directors and senior managers as well as organisations if a crash results in a fatality.”
Employers urged to relieve driver stress to improve road safety performance
Employees suffering from stress were 50% more likely to drive dangerously and thus be involved in crashes, according to John Sunderland Wright, training director at Performance on Demand.
Drivers’ health and well-being was critical to their behaviour on the road, Mr Sunderland Wright told FIAG workshop delegates highlighting that the heart and brain were the two key areas of the body “massively effected” by stress.
“Stress can inhibit personal performance,” said Mr Sunderland Wright. “High levels of stress causes the brain to do far too much and that causes problems, which for drivers manifests itself in road crashes.”
Employee surveys frequently highlighted that stress and tiredness were issues for them but, said Mr Sunderland Wright, sleeping for eight to nine hours per night was a solution. He also advised that continually hydrating the body with water was vital as dehydration reduced concentration and reaction levels by 20%.
With driver stress being a significant contributory factor to road crashes, Mr Appleby reminded delegates that it was a major focus for the HSE in improving work-related road safety.
He told delegates: “Are drivers so stressed that they cannot do their job properly? Employers must look at their work-related road safety policies and ensure that employees that drive on businesses have the opportunity to have their views on such issues heard.”
The FIAG workshop debate on the health and well-being of drivers concluded that it was “a hot topic” and it was important that “a massive knowledge gap” across employers was filled.
Delegates suggested that many employers were “reactive” and not “proactive” in managing employees and only reacted with new policies and procedures following an “incident”.
As a result, Geoffrey Bray, chairman of FIAG, which was launched four years ago to enable fleet decision-makers to share fleet industry best practice and knowledge, said: “It is vital that employees that drive on business are given advice and information on how to relieve stress and be less tired. Information should not just be written into a company car policy, but there should be conversations and drivers should be empowered to speak up. Drivers are part of the solution and not simply the problem.”
Businesses “nowhere near” maximising the potential of telematics technology
Nine in ten businesses that fit telematics to vehicles were “nowhere near” maximising the potential of the technology to obtain a full return on investment, Phil Powell, sales director at Matrix Telematics told the FIAG workshop.
However, companies that used telematics derived data to effectively manage driver behaviour and vehicle performance reaped significant financial benefits notably in terms of reduced fuel bills, lower maintenance costs due to employees’ adopting a smoother driving style, fewer road traffic crashes and reduced insurance premiums, he explained.
Highlighting that in-vehicle technology and ‘big data’ was the future, Mr Powell said: “Employers must harvest data from vehicles and use the information gathered to analyse both driver and vehicle performance.”
During a roundtable discussion, FIAG delegates agreed that telematic systems provided a wealth of data, but flagged up concerns that with the 25 May, 2018 introduction of the General Data Protection Regulation (GDPR) information collected must be used responsibly with drivers informed the use to which it was being put.
Delegates also agreed that fleet decision-makers could be swamped with the volume of data emerging from telematics system. As a result, it was critical to both centralise and compartmentalise information and focus on highlighted “errors and weaknesses” measured against established key performance indicators so drivers and vehicles were “managed by exception”.