Taste of tax to come on employees' benefits: Harsher measures may be waiting in the vans

ACCOUNTANTS fear that the 'petty' decision to set out the rules for taxing personal use of company vans may be a prelude to harsher treatment of employees' perks in the November Budget.

The Chancellor's decision to replace the complex arrangements for taxing employees' private use of company vans with a simple scale charge of pounds 500 covering both vehicle and fuel provided is seen as a further step towards codifying the Inland Revenue's treatment of benefits in kind. Coming after rules on the taxation of mobile telephones, cars and fuel, it reduces the number of benefits subject to individual arrangements between companies and local tax inspectors. But there is still great uncertainty.

Clive Tulloch, of Coopers & Lybrand, said Mr Lamont's comment that there would be further consultation on alignment between National Insurance contributions and income tax strengthened his belief that there would be a move by the end of the current Parliament.

This view is reinforced by the lack of action on Pepper v Hart. Last year's landmark House of Lords case involving teachers sending their children to Malvern College at a fraction of the normal fees decided that the marginal cost of providing in-house benefits rather than the average cost of the benefits should be used for tax calculations. But many have expected the Revenue to seek legislation changing the basis to the average cost.

Brian Friedman of Stoy Hayward pointed out that the company vans tax applied to comparatively low-paid employees, such as highway patrol people and television rental engineers, rather than executives, so the vehicles were unlikely to be used for pleasure.