MORE BAD NEWS FOR COMPANY CARS?

Did you know that emission thresholds for calculating benefits in kind for 2008/09 and 2009/10 have been lowered, and will fall again from 2010/11?

Unless you are already at the 35% maximum, the percentage used to calculate the benefit in kind on your company car will rise 2% by 2010/11.

Providing private fuel has also been made more expensive from 2008/09 - the taxable percentage will now be applied to a fixed amount of £16,900 instead of £14,400.  This means 40% taxpayers will pay up to £2,366 for this benefit with a cost to employers of up to £757 per car in Class 1A NIC.

Changes announced in the Budget to capital allowances available for business cars will not take effect until April 2009, but cars purchased from that date will no longer be treated as separate assets for capital allowances purposes.

The new emissions-linked system will see some cars placed in the general capital allowances pool, eligible for tax writing down allowances at 20%, with some cars going into the special pool and qualify for tax writing down allowances at 10%.

Depending on the cost of the car, the capital allowances may not differ too much from the £3,000 annual allowance currently given on cars costing more than £12,000. What is significant is that there will now be no balancing allowance given for the remainder of the cost of the car in the year it is disposed of.

There are also proposals to change the rules for leasing cars with emissions up to 160g/km.  If enacted, the full leasing cost of these cars is likely to be allowed as a deduction from April 2009.

At this stage, what is clear is that businesses thinking of replacing company cars in future will need to revisit the assumptions they are using.

There are some cheaper options for business motoring if you are prepared to use a low emissions car (such as electric or hybrid fuel models). However, the size and specification of the cars that attract favoured rates for Capital Allowances and benefit in kind purposes may not be a practical option for use in all businesses, nor an attractive one for many drivers.

There will be much more to be said about this issue over the coming months – If you require further information, or would like to discuss any specific aspects in more detail, please contact Nick Mayers on 01242 252555 or email This e-mail address is being protected from spambots, you need JavaScript enabled to view it