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Taxman perking up some car rental deals – Bidvest Bank

By Bidvest Bank

Recent changes to how perks tax is calculated have prompted growing interest in some long term car lease options, says the vehicle finance, leasing and asset-based lending division of Bidvest Bank.

The bank is close to company car market trends as its website enables car allowance recipients to calculate tax consequences while its staff members are trained to explain all purchase, leasing and rental options and their financial implications month by month and at the end of the transaction.

Byron Corcoran, head of asset-based lending at Bidvest Bank notes: “It’s impossible to give general guidance on how the new calculation will work out. Every case is different. In some instances, the tax benefit can be considerable. Car allowance recipients and their employers should check the variables.”

The taxable benefit of a company provided car is based on 80% of the vehicle’s purchase price including VAT multiplied by a tax rate of 3,5%.

The recent changes to perks tax allow the employee to apply the 3.5% tax rate to the monthly lease payment as opposed to the purchase price.

Corcoran adds: “In some instances, the company car recipient would be better off if their employer had acquired the vehicle by way of a full maintenance leasing or operating rental package as opposed to Instalment sale. In other cases, the tax benefit is negligible or there may be no benefit all.

“The change in the perks tax calculation only came into force from 1 March 2013. Almost immediately it prompted big interest our operating rental packages.

“This new development underlines the importance of careful decision-making. Scrutinise all the available packages. The tax impact is important, but other factors also have to be considered. Seek advice from specialists who offer all the options and have no particular bias toward any specific type of deal.”