Winter 2007

Company tax - Go Green

Go Green And Get The Tax Man To Help You Buy A Car

The current rules regarding company car benefits are based around taxing a percentage of the vehicle’s list price. The percentage that is used depends upon how green your car is – currently if the Co2 emissions are 120gm/km or less, the Benefit in Kind charge is based on 15% of the list price for a petrol car. From 6 April 2008 this will reduce to 10%. The advantage to the company is that it can write the car off in full against taxable profits in the year of purchase.

Perhaps it is best illustrated with an example e.g.

Mike owns a company that pays corporation tax at 20%. He is a 40% taxpayer and decides to buy his wife a car with Co2 emissions of 109gm/km, with a list price of £7555. This will be sold in 3 years for £3000. Annual running costs, excluding fuel are £750
 

Tax on Mike	List Price	Taxable %	Benefit	Tax Rate	Tax Payable
2007/08	7555 x	15%	1133	40%	£453
2008/09	7555 x	10%	755	40%	£302
2009/10	7555 x	10%	755	40%	£302
Total Payable					£1057

Tax on Company (3 Year Period)

	£
Initial Tax Relief on cost of car 7555 x 20%	1511
Class 1A NIC less tax relief	(270)
Tax Relief on running costs	450
Tax due on sale of car 3000 x 20%	(600)
Net Relief	£1091

As you can see, over a 3 year period the company has provided Mike’s wife with a company car and managed to save £34 overall – what’s more is that the vehicle excise duty for this car is just £35 per year. Car manufacturers are producing increasing numbers of cars with low emissions – please contact us so we can direct you to a list of cars currently falling into the lowest emissions category.