Partner Rebecca Benneyworth Training Consultants
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Squeeze continues on company cars

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21st Mar 2012
Partner Rebecca Benneyworth Training Consultants
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Significant changes to the company car tax regime will come into force from April 2012. The next two years’ changes have been legislated before, but Budget 2012 continued the theme into 2014 and beyond.

The key change that will apply as the new regime goes forward is the broadening of the table of tax rates so that it starts at 10% of list price rather than 15%. This involves reducing the lowest emissions rate from 125g/km to 99 g/km. Some drivers – those for example driving the Vauxhall Agillia with emissions of 119g/km will see a tax rise of 40% from April 2012.

Capital Allowances

1. Low emissions first year allowances: From April 2013 the 100% FYA for businesses purchasing low emissions cars will be extended for a further two years to 31 March 2015. The CO2 threshold below which cars are eligible for the FYA will also be reduced from 110g/km to 95g/km.

2. From April 2013, the CO2 emissions threshold for the main rate of capital allowances of 18% for business cars will reduce from 160g/km to 130g/km. This will also be the new threshold above which the lease rental restriction applies.

Source: PracticeWEB Budget Report 2012

First While changes from April 2013 have already been announced, this is the full programme of increases up until April 2017:

  • From April 2013, the lowest figure on the table will be below 95g/km, with a benefit in kind of 10%, producing a 1% increase for most drivers
  • From April 2014, the 10% rate will disappear, with cars emitting less than 95g/km taxed at 11%
  • The special 5% rate for cars emitting no more than 75g/km remains until 2015 but is abolished from April 2015. (this is subject to a 3% addition for diesel).
  • The 0% rate applying to zero emission cars is abolished from April 2015.
  • The resulting Table from 2015 will start at 13% - applying to emissions of up to 94 g/km (16% for diesels), with 14% applying to emissions of 95 – 99 g/km.
  • From April 2015, the top rate increases from 35% to 37% - applying to cars emitting 210g/km and above.
  • From April 2017 the 3% supplement for diesel cars will be abolished, but there is a further 2% increase in all benefits. At that point, emissions of 0 – 94 will be taxed at 15%, moving up to 37% for a car emitting 200g/km and above.

So a driver of a Citroen C1, emitting 109g/km, presently taxed at 10% of list price will see the benefit in kind rise to 18% of list price by April 2016 – an 80% increase.

Car fuel benefit scale charge has increased from £18,800 to £20,200, 2% over the rate of inflation. Government has also committed to increasing this by 2% over the rate of inflation for the foreseeable future.

Technical information on these measures are set out in tax information and impact notes (TIINs) in HMRC's Overview of Tax Legislation and Rates document (1.2Mb PDF download). To find the details quickly, search for the following TIIN references:
- Company Car Tax Rates - A27
- Company Car Fuel Benefit Charge - A3
- Company Car rates and allowances - Annex B
- Capital Allowances: emissions thresholds for allowances, paragraphs 2.29 and 2.30

Replies (2)

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
22nd Mar 2012 09:02

Crackdown predicted by Macintyre Hudson's Alastair Kendrick

 

Last month, we got a doom-laden press statement from MHA Macintyre Hudson predicting an aggressive plan for company car taxation and warning about the impact it would have both on company car users and the leasing industry.

MHA employment tax director Alastair Kendrick commented: “It simply won’t be economical to offer cars to employees. There is an incentive to encourage manufacturers to devise ‘greener’ cars which produce lower CO2 emissions but we will see the benefit in kind on a 120g/km car increase from the current level of 10% (13% for diesel) to 16% in 2013 (19% for diesel).

“Many businesses have already stopped company cars as a benefit and I predict this trend to continue. Unfortunately, numerous employees will only be aware of these changes when they receive their April pay packet and it will just be another blow during hard pressed times. The group likely to be most affected is those who have taken low emission cars via a salary sacrifice car scheme and are, in addition to the taxable benefit, taking a salary reduction to cover the employer's cost of leasing the car.”

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the sea otter
By memyself-eye
26th Mar 2012 10:29

Bring on the Fiesta

With Ford's new 'ECO tech' (or whatever it's called) 3 cylinder engine at 87gm/km. Suddenly our company ALTO at 103gm/km isn't such a bargain.

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