Company Car Tax Guide
How the new tax guide rules apply to your fleet & Company Car
From April 2009 new rules applying to the tax treatment of cars were introduced which impacted all organisations that own, lease or contract hire cars as follows:
Company Owned Cars
CO2 emissions up to 110g/km
• WDA of 100% in the first year
CO2 emissions between 110g/km and 160g/km
• WDA of 20% per annum on a reducing balance basis
• Balancing allowance on disposal no longer given
CO2 emissions over 160g/km
• WDA of 10% per annum on a reducing balance basis
• Balancing allowance on disposal no longer given
WDA: Writing down allowance – tax depreciation based on value of car
Balancing allowance – the tax loss on disposal of car, for which tax relief is available
Leased Cars
Expensive Vehicle Leasing Disallowance
Under
the old rules a proportion of the finance cost was disallowed in the
corporation tax calculation on a sliding scale based on the cost of
the car rising from zero at £12,000 to over 30% on cars costing over
£30,000
HMRC have basically changed this disallowance to a Co2
based system with a maximum disallowance now at 15% for cars emitting
over 160/km which has removed the disincentive to contract hire
expensive vehicles.
CO2 emissions up to 110g/km
• Tax relief for 100% of the annual rental cost
CO2 emissions between 110g/km and 160g/km
• Tax relief for 100% of the annual rental cost
CO2 emissions over 160g/km
• Tax relief for 85% of the annual rental cost
Summary of winners and losers in leased car market
|
C02
|
OTR |
||
| up to £12,000 |
between £12,000 & £17,140 |
Over £17,140 |
|
| Up to 160g/km |
100% relief (no change) |
100% relief (better off) |
Now 100% relief (better off) |
| Over 160g/km |
Now 85% relief (worse off) |
Now 85% relief (worse off) |
Now 85% (better off) |
• Cheaper leased cars (sub £12,000) over 160g/km become more expensive
• Expensive leased cars (£12,000+) under 160g/km become cheaper
• Cars over £17,140 list price become cheaper to lease regardless of emissions
Implications on car fleet policy:
• Changes generally favour low CO2 emission fleets, especially below 160g/km
• Continued significant tax benefit for owned cars with CO2 emissions of up to 110g/km
• For cars bought outright then sold after a few years, the accelerated relief from balancing allowances is no longer available
• For leased cars with a retail price greater than £17,140 tax relief now better regardless of Co2's
• The post-tax cost of car fleets will be affected
• Review the choice of cars available and limit Co2 emissions
Your account manager will be happy to offer further advice on the most tax and cost effective way to fund your vehicle Leasing & Contract Hire needs.
