HMRC 'Car averaging' tax rules simplified

Date: 07 November 2008

HMRC has moved to simplify the tax rules for drivers in the motor trade who are not allocated a specific car.

The rules, known as car averaging agreements, relate mainly to rental firms or dealers that frequently switch staff between vehicles rather than give them an allocated company car.

Due to what HMRC describes as a "perceived lack of consistency and impressions of unfairness" caused by the need for individual agreements between each employer and their local tax office, the department has introduced a new national scheme that takes effect from 6 April 2009. The change effects only companies that have existing car averaging agreements with their local tax office.

HMRC consulted with various trade bodies including ACFO and BVRLA, and will jointly review the new way of working next autumn.

Guidance on how the new system will operate can be found at www.hmrc.gov.uk/cars/averaging.pdf.

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