Company car tax: What you need to know

Tax on company cars hasn’t changed a lot in recent years, apart from changes in emission thresholds and HMRC now reviewing mileage rates quarterly.

Given the many conditions and provisions involved in taxing company vehicles however, it can be a difficult subject to tackle.

Romford Essex accountants recently blogged about taxation on company cars, of which we have provided a short digest for AccountingWEB readers in our Business Tax Library.

Register with AccountingWEB for free to read the rest of the article, which includes:

  • The basics
  • Older cars
  • Fuel scale charges
  • Current mileage rates
  • Tax free benefits
  • Business use of an employee’s own car

Continued...

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Comments

Contradiction

EGG | | Permalink

There appears to be a contradiction in the above article, namely:

 

'Cars registered from November 2000 will have their definitive C02 emissions figure for tax purposes recorded on their vehicle registration document. '

&

'Cars registered before January 2008 will have no reliable C02 emissions data, according to Romford Essex accountants. '

Rachael_Power's picture

Apologies, that should read

Rachael_Power | | Permalink

Apologies, that should read 1998. It's amended now.

daveforbes's picture

accessories

daveforbes | | Permalink

What about accessories - I notice the picture is of Ronaldo's Bentley. The number plate reportedly cost more than the car.

Rachael_Power's picture

Good spot, and good point. 

Rachael_Power | | Permalink

Good spot, and good point. 

HMRC guidance on car accessories, repairs and other motoring expenses are available on their website.

Guidance says that input tax cannot be claimed on optional extras or accessories that are fitted at the time of purchase to a car that is subject to the input tax block.

This applies even if the car dealer itemises them on a sales invoice or invoices for them separately, as accessories form part of the single supply of a car which is subject to the block.

HMRC will also consider whether the accessory or modification was for entertainment and personal indulgence or for business purposes.

If a car is in the company

stevo5678 | | Permalink

If a car is in the company name and a member of staff uses it occasionally privately but takes it home daily.  By paying the company back 45p per mile for all of the private miles, would this negate the need to incur any taxable benefit as there would in effect be no benefit if re-imbursing the company at full cost...?

Not how it works

raychidell | | Permalink

@stevo5678 No, that is not how it works - for two reasons.

First, if the member of staff takes the car home daily, then he is using it for private purposes (those of commuting between home and work). The car is available for his private use and a tax benefit follows.

That being so, the full car benefit arises. Paying the company back at 45p per mile will not remove that tax charge. If the payments are made as a condition of the car being available for the private use, and are for that use, they will be allowable against the full car benefit. But you cannot work on the basis that the 45p covers the cost and that there is therefore no taxable benefit - that is just not how the legislation works.

If the fuel is being paid for by the company, a fuel charge will also arise (which is prohibitively expensive and which should be avoided in all cases).

Ray

www.claritaxbooks.com

 

We pay a big amount for car

SusaneW | | Permalink

We pay a big amount for car tax and must know all the rules regarding it. In US individual states manage their car tax differently but the guidelines are same. Tax on a older car and new car is different and there are also some relaxations for people of low income groups. I would like to thank you for providing these useful tax saving tips that every individual should know.

Summit car service

 

Ray - almost

Paulsoper | | Permalink

Although the position on the car is that a payment of Xp per mile may not avoid the liability it can reduce the liability and maybe even exceed the liability!  Not such a good idea.

It should be pointed that where fuel is provided to an employee with a company car the fuel benefit can be avoided by either claiming the fuel costs for business journeys only or by reimbursing the employer for private mileage, either using actual costs or by using the Advisory Fuel rates which are revised 4 times a year, and vary depending on fuel used and engine size.  If an employee is reimbursing the employer and the rates go up it is critical to reimburse at the right rate as under-reimbursement, even by a penny, will trigger a full fuel scale charge.

If the employee is claiming for business mileage only under-reimbursement has no consequences, over-reimbursement will cause the excess to be taxed as remuneration for both IT and NIC purposes.

Almost?

raychidell | | Permalink

Hi Paul

I don't disagree with anything you say, but you seem to be implying that something I said was not correct. If so, please can you clarify what you disagree with.

Thanks

Ray

Almost?

Paulsoper | | Permalink

I was not implying that there was anything wrong or incorrect, merely that you mentioned the issue of fuel benefit but not the effect that reimbursement can have, your answer 'almost' covered everything but not quite... no offense intended, hopefully none taken.

Almost!

raychidell | | Permalink

Thanks Paul

It takes a lot more than that to cause me any offence (!) but I was just not quite clear what you were saying. I think there is nothing between us at all on the technical aspects, but you took my reply on a further stage.

Ray