05 November 2024
The government has stated its intention to legislate against a practice which created a loophole in the taxation of cars.
They stated that draft legislation will be brought forward to end the practice where an employer or third party purchases a car, leases it to an individual with a loan, usually with no repayment terms and minimal interest, then buys it back after a short period.
The budget documentation stated:
“5.28 Ending contrived car ownership schemes – The government will publish draft legislation relating to loopholes in car ownership arrangements, through which an employer or a third party sells a car to an employee, often via a loan with no repayment terms and negligible interest, then buys it back after a short period. This arrangement means those benefiting don’t pay company car tax which other employees pay, and so this measure will seek to level the playing field. The changes will take effect from 6 April 2026.”
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