Pictured: Sarah Moss
Company car drivers are being urged to check increased tax costs
on CO2 emissions when selecting their vehicles, according to
leading accountants and business advisers PKF.
Many employees will be selecting new cars when the new
registration is introduced from 1 September but PKF warns that
selecting the wrong vehicle could cost the employee hundreds of
pounds more per year in extra tax. The ever changing regulations
concerning vehicle benefit in kind charges can mean a company car
picked now could end up considerably more expensive by the time it
is due to be renewed.
Sarah Moss, tax partner at PKF, explains: "A current example
would be a car ordered in 2007/08 with CO2 emissions of 150g/km
which will be taxed on 20% of its value in the current tax year,
yet was only taxed on 17% when ordered. A car ordered in 2011/12
with CO2 emissions of 119g/km will currently benefit from a 10% tax
charge but at the end of a 3 year period it will be chargeable at
15% tax.
"Employees are not taxed if they make use of electric cars under
the current rule (i.e. until April 2015) and petrol cars with
emissions under 75g/km only suffer a 5% charge. A car with a CO2
emission level of under 100g/km remains tax efficient for the
employee and also entitles the employer to claim 100% first year
capital allowance on purchase of the vehicle.
"It is clear that company car selection is becoming more
complex. A low purchase price may mask higher tax costs later.
The example below compares two diesel powered cars - a Golf S
and a lower CO2 equivalent. The Golf S works out cheaper in the
current tax year, due to its lower list price, but costs an
additional 25% in tax in 2012/13.
Patrick Harrison, tax partner at PKF comments: "For those at the
other end of the market it should also be remembered that there is
now no £80,000 cap on the list price of a company car, so a
£120,000 Bentley Continental will now have a benefit charge
of up to £42,000 instead of the previous £28,000."
For more information about PKF, please visit their website here:
www.pkf.co.uk