Introduction

The Government changed the basis, with effect from as long ago as 6th April 2000, under which company cars are taxed. They claimed that the reform is revenue-neutral. However, the level of CO2 emissions qualifying for the minimum charge has reduced by 10% per year for a number of years thus increasing the tax revenue for any given level of emissions.

Cars Not Vans

This relates to cars. Vans are dealt with under a different system. Details of them are given further on in this fact-sheet.

A Failure Of This System

The new system introduces anomalies as the business mileage reductions are abolished. Thus two employees might have cars with identical list prices. The only difference between the two cars is their respective emissions of CO2.

The first employee uses his car largely for business. The car has an emission of 265g/km. The benefit is therefore calculated at 35% of the list price.

The other employee has negligible business use of her car. Its emissions are only 165 g/km. The benefit in kind was therefore assessed at 15% of the list price in the first year of the new scheme and at 24% in 2012/13.

Thus, although the new system is intended to provide an incentive to chose "green" cars it also means that in such cases as quoted here a business user pays more tax than a pure perk.

The new system also fails to take into account the pollution effect of actually manufacturing new cars as opposed to the minimal pollution effect of maintaining existing cars. The increasing efficiency demanded to pay only the minimum tax encourages annual replacement of cars.

The Basis: (not exactly still new as it started From 6th April 2002)

  • A 5% band was introduced from 2010/11 onwards (see table)

  • The tax charge is based on a percentage of the car's price graduated according to the level of the cars carbon dioxide (CO2) emissions.

  • The maximum charge is 35% of the car's price

  • The previous mileage discounts were abolished.

  • The age related discounts were also abolished.

  • Diesel cars are subject to a 3% supplement, although this will not take the maximum charge over the maximum of 35%.

Fuel For Private Motoring

If the employer provided fuel for private motoring in an employer owned car the taxable benefit in kind is the CO2 based percentage from the following table multiplied by the fuel figure for the tax year.

The fuel figure for 2016/17 is £22,200 (2012/13 was £20,200)

For example

The taxable Fuel benefit for a car with 161 g/km CO2 emissions will be

Petrol £22,200 x 26% = £5,772

Or if Diesel £22,200 x 29% = £ 6,438

Employee contributions for fuel do NOT reduce the taxable figure unless ALL private fuel is paid for by the employee.

BEWARE:
If just £10 of private fuel is used in the tax year and not reimbursed to the Employer then the employee will be taxed on £22,200 even though it would have been much more financially advantageous for that employee to pay the £10 back to the employer!

How The Benefit In Kind Is Calculated

The level of CO2 emissions qualifying for the minimum charge has increased as follows:

2014/15 to 2016/17

50 g/kg

 

 

 

 

2011/12 to 2014/15

75 g/kg

2010/11

75 g/kg

2009/10

120 g/kg

2008/09

120 g/kg

2007/08

140 g/kg

2006/07

140 g/kg

2005/06

140 g/kg

2004/05

145 g/kg

2003/04

155 g/kg

2002/03

165 g/kg

  • The starting point for calculating the tax is the car's list price including accessories. If you manage to buy the car at a discount that tax man says tough! You still pay based on the list price.
  • The charge is based on a percentage of that price graduated according to the car's CO2 emissions.

  • The exact CO2 figure is rounded DOWN to the nearest 5 g/km for company car tax purposes.

  • There are now starting bands of 5% and 10%.

  • Above that, The charge builds up from 10% of the car's price, for cars emitting the specified figure in the detailed following table (g/km)CO2, in 1% steps for every additional 5g/km over the band.

  • Because of the 3% addition for diesel cars they reach the maximum of 35% before its petrol equivalent.

We have done some maths for you!

The table is calculated as follows:

 

CO2 Emissions in g/km

206/17

From

To

Petrol

Diesel

1

50

7%

10%

51

75

11%

14%

76

94

15%

18%

95

99

16%

19%

100

105

17%

20%

106

110

18%

21%

111

115

19%

22%

116

120

20%

23%

121

125

21%

24%

126

130

22%

25%

131

135

23%

22%

136

140

20%

26%

141

145

21%

24%

146

150

22%

25%

151

155

23%

26%

156

160

24%

27%

161

165

25%

28%

166

170

26%

29%

171

175

27%

30%

176

180

28%

31%

181

185

29%

32%

186

190

30%

33%

181

185

31%

34%

186

190

32%

35%

 

191

195

33%

196

200

34%

201

No limit

35%

Cars With No Co2 Emissions Figure (2002/03 onwards)

Cars first registered after 1st January 1998 that have no approved CO2 emissions figure (perhaps because they have been imported from outside the EC) will be assessed on engine size as follows:-

Engine size

Percentage of car's
price Charged to tax

0 to 1400cc

15%

1401cc to 2000 cc

25%

2001cc and more

37%

Rotary engines 37%

Cars without a cylinder capacity will be taxed at 15% if solely propelled by electricity and 37% in all other cases (rotary engined cars).

Older Cars (2002/03 to 2016/17 inclusive)

There are no reliable sources of CO2 emissions for cars registered before January 1998. These cars will therefore be taxed according to their engine size as follows:

Engine size

Percentage of car's
price Charged to tax

0 to 1400cc

15%

1401cc to 2000 cc

22%

2001cc and more

32%

All rotary engines 32%

Older cars without a cylinder capacity will be taxed at 15% if solely propelled by electricity and 32% in all other cases (rotary engined cars).

Vans (and Pick Ups)

The system of taxing company vans also changed some years ago. Whereas previously any element of private use whatsoever caused there to be a taxable benefit in kind, now a limited amount of private use no longer attracts a benefit in kind charge.

What Private Use Is Allowed

  • Travel to and from work.

  • Calling at a newsagents or similar shop on the way to or from work from occasion incidental purchases.

What Private Use Creates A Benefit In Kind.

  • Travel to and from the Supermarket to do the weekly shop

  • Towing your private boat with the company pick up.

  • Other holiday or recreational use of a company van/pick up.

What Is The Benefit In Kind?

  • The chargeable value is £3,170 for the tax year 2016/17

What Is Fuel Is Provided?

  • The chargeable value of fuel for a company van/pick up for 2016/17 is £598

There are set rules as to what constitutes a commercial vehicle. Some of these are or should be obvious but the unwary can trip themselves up. Here are some notes which may help.

  • A car has the usual meaning.

  • An Estate car is a car not a van, not even if you fix a tow bar and tow a trailer. That does NOT make it a van.

  • A van or pick up which has seats/windows behind the driver’ seat must still have a payload of 1 tonne or more.

  • Beware: some popular Japanese pickups when a fixed cover (tilt) is fitted to the rear can no longer legally carry 1 tone or more. This puts them at risk of being classified as a car not a van. The benefit in kind if taxed as a car vastly exceeds the benefit in kind of a van.

For information of users:
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.