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Company cars: tax liability on cash versus car option - part 4

Julie Clift, tax writer at Croner-i, looks at how the optional remuneration (OpRA) rules apply when an employee decides to take the cash rather than the company car, as well as other changes to salary sacrifice rules

Where, from 6 April 2017, an employee can choose to receive either a cash allowance or a company car with CO2 emissions of more than 75g/km and chooses the car, the optional remuneration rules will apply (Income Tax (Earnings and Pensions) Act 2003, s120A).

Cars with CO2 emissions more than 75g/km

The taxable amount of the benefit of the car will be the higher of:

  • the modified cash equivalent (ignoring any capital contributions and any amount the employee makes good for the use of the car); and
  • the amount of the salary foregone.

This is the relevant amount. Once the relevant amount has been determined, a deduction is then made for:

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