Clause 34 - Car fuel: calculation of cash equivalent of benefit
Finance Bill
4:30 pm
Mr Paul Boateng (Financial Secretary, HM Treasury; Brent South, Labour)
Fourteen thousand, four hundred pounds. The amount will be set at a level intended to ensure that the total tax collected overall for the next year does not increase in real terms. The complexity introduced there will ensure that there is no increase in the total tax payable. This new approach aims to make the system as simple as possible to administer, and it will be much simpler once the initial calculation has been made.
In response to requests from business, we are also introducing a new system of apportionment when an employee permanently ceases to be provided with free fuel during the year. The current fuel scale charge is an all-or-nothing charge so that a single amount of free fuel in any tax year leads to imposition of the full charge for the year. As right hon. and hon. Members know, employees and employers are increasingly deciding that it is not worthwhile to provide free fuel. Previously, they would have been penalised for coming to that decision mid-year and that was deterring employers and employees from providing and receiving free fuel when that might have suited them. The clause will allow employees to stop receiving free fuel at any time within a tax year and to benefit from having the fuel scale charge reduced proportionately. They will be taxed only for the number of days in the year for which free fuel was provided. Our intention is to remove a barrier that hinders employers and employees in ceasing to provide and receive free fuel part of the way through the year. However, we must avoid abuse of the new easement. We do not want people opting in and out of free fuel when they go on holiday. If an employee receives free fuel again later in the same tax year, a full year's tax charge will be due.
The new fuel scale charge system will be more environmentally friendly and will encourage the use of cleaner cars by directly linking the tax charge to the car's CO2 emissions. It will be straightforward for
employers to operate, administrative burdens will be kept to a minimum, and it will be easier for employees to understand.
I hope that, having heard my explanation, the hon. Gentleman will withdraw his amendment. It would enable people to opt in and out whenever they go on holiday and I am sure that he does not want that. I hope that he feels that I have gone at least some of the way in addressing his concerns.