Version:1.0 StartHTML:000000241 EndHTML:000012835 StartFragment:000003084 EndFragment:000012777 StartSelection:000003084 EndSelection:000012773 SourceURL:https://www.ts-rc.co.uk/ard/detail_doc.asp?ID=642609&AID=1997&SID=33&FID=37404  Cars for Employees - Davies Parsons Allchurch Solicitors, UK variJargonTimer = 0; function onJargonMouseOver( term ) { iJargonTimer = window.setTimeout( "showJargonSummary( '" + term + "', " + ( event.clientX + 10 ) + ", " + ( document.body.scrollTop + event.clientY + 5 ) + " )", 500 ); } function onJargonMouseOut( ) { if ( iJargonTimer != 0 ) { doc = document.getElementById( "JargonSummary" ); clearTimeout( iJargonTimer ); iJargonTimer= 0; doc.style.visibility = "hidden"; doc.style.display = "none"; } } function showJargonSummary( term, clientX, clientY ) { doc = document.getElementById( "JargonSummary" ); doc.innerHTML = ob_post( 'on_Jargon_Summary', term ); doc.style.visibility = "visible"; doc.style.display = "block"; doc.style.left = clientX + "px"; doc.style.top = clientY + "px"; }   BODY, .DocumentBody { margin: 0; padding: 0; } P, LI, TD, .NavigationText { font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 14px; color: #919191; line-height: 20px; } H1, .Heading { font-family: "Cambria", Georgia, sans-serif; font-size: 28px; font-weight: normal; color: #3b3b3b; } H2, H3, .Heading3 { font-family: "Cambria", Georgia, sans-serif; font-weight:normal; font-size: 23px; color: #3b3b3b; margin-bottom: 20px; line-height: normal; } A { color: #0099cc; border-bottom: dotted 1px #0099cc; text-decoration: none; } A:hover { color: #AFB429; border-bottom: dotted 1px #AFB429; text-decoration: none; } #CookieTrail { margin: 0; padding: 0; } .DocSummaryBorder {} .eNEWSBody { font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 12px; color: #919191; } .eNEWSHeading { font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 12px; color: #0099cc; } .eNEWSHeading:hover { color: #AFB429; border-bottom: dotted 1px #AFB429; text-decoration: none; } .eNEWSTitle { font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 12px; color: #0099cc; border-bottom: dotted 1px #0099cc; text-decoration: none; } .eNEWSTitle:hover { color: #AFB429; border-bottom: dotted 1px #AFB429; text-decoration: none; } .Tax_Heading { background-color: #60a5d1; margin: 0 5px; padding: 0; font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 12px; color: #FFFFFF !important; } .Tax_Row { background-color: #FFFFFF; margin: 0 5px; padding: 0; font-family: Calibri, Arial, Helvetica, sans-serif; font-size: 12px; color: #919191; }

Cars for Employees

The current regime for taxing employer provided cars (commonly referred to as company cars) is intended:

• to encourage manufacturers to produce cars which are more environmentally friendly and
• to give employee drivers and their employers a tax incentive to choose more fuel-efficient and environmentally friendly vehicles.

We set out below the main areas of importance. Please do not hesitate to contact us if you require further information.

The rules

Employer provided cars are taxed by reference to the list price of the car but graduated according to the level of its carbon dioxide (CO2) emissions.

Percentage charges

CO2 emissions (gm/km)*2016/172017/18% of car's  price taxed% of car's  price taxed0 - 507951-75111376 – 9415179516181001719105182011019211152022For every additional 5g thereafter add 1%--Until the maximum percentage is reached3737

*  Emissions are rounded down to nearest 5gm/km for values above 95gm/km

Examples

Jane was provided with a new company car, a  Mercedes CLK 430, on 6 April 2016. The list price is £50,000. The  CO2 emissions are 240 gm/km.

For 2016/17 and 2017/18 Jane’s  benefit  will be £50,000 x  37 % =£18,500.

Phil has a company car, a BMW 318i, which  had a list price of £21,000 when it was provided new on 6 April 2016. The  CO2 emissions are 117 grams per kilometre. Note: The CO2 emissions  are rounded down to the nearest 5 grams per kilometre - in this case 115.

Phil's benefit for  2016/17  is: £21,000 x 20%  = £4,200. Phil’s benefit will increase for 2017/18 to £4,620  being £21,000 x 22%.

Diesels

Diesel cars emit less CO2 than petrol cars and so would be taxed on a lower percentage of the list price than an equivalent petrol car. However, diesel cars emit greater quantities of air pollutants than petrol cars and therefore a supplement of 3% of the list price generally applies to diesel cars. For example, a diesel car that would give rise to a 22% charge on the basis of its CO2 emissions will instead be charged at 25%. The maximum charge for diesel is capped at 37%.

The government had previously  announced that the diesel supplement  would  be removed from 6 April 2016 however this 3% differential will be retained  until April 2021.

Obtaining emissions data

The Vehicle Certification Agency produces a free guide to  the fuel consumption and emissions figures of all new cars. It is available on  the internet at  http://carfueldata.direct.gov.uk.  These figures are not however necessarily the definitive figures for a  particular car.  The definitive CO2  emissions figure for a particular vehicle is recorded  on the Vehicle Registration Document (V5).

The list price

• The list price of a car is the price when it was first registered including delivery, VAT and any accessories provided with the car. Accessories subsequently made available are also included (unless they have a list price of less than £100).
• Employee capital contributions up to £5,000 reduce the list price.

Employer’s Class 1A national insurance contributions

The benefit chargeable to tax on the employee is also used to compute the employer’s liability to Class 1A (the rate is currently 13.8%).

Imported cars

Some cars registered after 1 January 1998 may have no approved CO2 emissions figure, perhaps if they were imported from outside the EC. They are taxed according to engine size.

Engine size (cc)

% of list price charged to tax
           2017/18

0 - 140016%1401 - 200027%over 200037%

Private fuel

There is a further tax charge where a company car user is supplied with or allowed to claim reimbursement for fuel for private journeys.

The fuel scale charge is based on the same percentage used to calculate the car benefit. This is applied to a set figure which is £22,600 for 2017/18 (£22,200 for 2016/17). As with the car benefit, the fuel benefit chargeable to tax on the employee is used to compute the employer’s liability to Class 1A. The combined effect of the charges makes the provision of free fuel a tax inefficient means of remuneration unless there is high private mileage.

The benefit is proportionately reduced if private fuel is not provided for part of the year. So taking action now to stop providing free fuel will have an immediate impact on the fuel benefit chargeable to tax and NIC.

Please note that if free fuel is provided later in the same tax year there will be a full year’s charge.

Business fuel

No charge applies where the employee is solely reimbursed for fuel for business travel.

HMRC  issue advisory fuel only mileage rates  for employer provided cars.  Employers can adopt the rates in the following table but  may pay lower rates if they choose.

Rates from 1 September 2017

Engine size

Petrol

1400cc or less11p1401cc - 2000cc13pOver 2000cc21p

Engine size

LPG

1400cc or less7p1401cc - 2000cc8pOver 2000cc13p

Engine size

Diesel

1600cc or less9p1601cc - 2000cc11pOver 2000cc12p

HMRC update thesee rates on a quarterly basis in  March, June, September and December. The latest rates can be found at https://www.gov.uk/government/publications/advisory-fuel-rates

Employees’ use of own car

There is also a statutory system of tax and NIC free mileage rates for business journeys in employees’ own vehicles.

The statutory rates are:

Rate per mile

Up to 10,000 miles45pOver 10,000 miles25p

Employers can pay up to the statutory amount without generating a tax or NIC charge. Payments made by employers are referred to as ‘mileage allowance payments’. Where employers pay less than the statutory rate (or make no payment at all) employees can claim tax relief on the difference between any payment received and the statutory rate.

How we can help

We can provide advice on such matters as:

• whether a car should be provided to an employee or a private car used for business mileage
• whether employee contributions are tax efficient
• whether private fuel should be supplied with the car.

Please contact us for more detailed advice.