Company Cars

As the government is now trying to encourage more of us to become more environmentally friendly, they have introduced legislation which could now make company cars more attractive from a tax saving point of view…..

• 100% First Year Allowances (FYA) are available on cars with emissions of no more than 100g/km (“QUALECs” – qualifying low emission cars).

 

• This allows a 100% revenue deduction where a business purchases a QUALEC.

 

 

• Road fund tax is low for these cars, at £35 per annum if between 101 and 110g/km (£15 if using alternative fuel) or NIL if not over 100g/km.

 

Examples of QUALECs:

 

		C02 Emissions		BIK	BR Tax	Class 1A
Model	List price (£)	G/Km	0-60 Secs	Value	due	NIC
Smart ForTwo Coupe 60 mhd Pure	6,912	103	16.7	10%	138.24	95.39
Nissan Pixo 1.0 Vista	6,995	103	11	10%	139.9	96.53
Toyota Aygo VVT-i	7,505	106	14.2	10%	150.1	103.57
Peugot 107 Urban Lite	8,095	106	14.2	10%	161.9	111.71
Suzuki Alto 1.0 SZ2	7,245	103	13.5	13%	188.37	129.98
Toyota IQ 1.0	9,615	99	14.7	10%	192.3	132.69
Seat Ibiza 1.4 TDI Greenline	11,805	98	12.9	13%	306.93	211.78
Skoda Fabia 1.4 Tdi Greenline	12,140	109	13.2	13%	315.64	217.79
Fiesta 1.4 TDCi Studio	12,195	110	14.9	13%	317.07	218.78
Honda Insight 1.3s	15,890	101	12.5	10%	317.8	219.28
Polo 1.4 Tdi 80 BlueMotion 1	13,105	99	12.8	13%	340.73	235.10
Fiesta 1.6TDCi Econetic	13,795	98	12.3	13%	358.67	247.48
Honda Civic 1.4i VTEC Hybrid ES	17,970	109	12.1	10%	359.4	247.99
Toyota Prius 1.8 VVT-I T3	18,590	89	11	10%	371.8	256.54
Mini Cooper 1.6D	14,785	104	9.9	13%	384.41	265.24
Volvo C30 1.6D Drive Start/Stop	16,245	104	10.7	13%	422.37	291.44
Audi A3 Sportback 1.6TDi 105 SE	19,205	109	11.7	13%	499.33	344.54
BMW 320d Efficient Dynamics	27,245	109	8.2	13%	708.37	488.78

 

Illustration 1

In the right circumstances, members of a family can have a company car with low tax charges all round.

Mrs Jones runs a small company and decides to provide her 2 children with a company car each – Nissan Pixo Vistia. They do not work for the company, and all mileage will be private. She is a 40% taxpayer. The tax position is as follows:

 

Income tax on Mrs Jones per car:
List price £6,995 @ 10% = £699 @ 40% = £279 per annum

 

Company’s position per car:
100% FYA on £6,995 @ 20% = £1,399
Class 1A NIC on £699 @ 13.8% = £96 per annum (reducing to £77 after CT relief)

• Full VAT reclaim on input tax on car servicing etc (unless registered for the Flat Rate Scheme).
• Corporation tax relief will be obtained at 20% on the running costs (Insurance is likely to be very high if insured in the children’s own names so the tax relief could be significant).

 

 

Mr Smith decides to purchase an Audi A3 Sportback 1.6TDi 105 SE through his limited company. All fuel is paid personally by Mr Smith. He is a 20% taxpayer.

 

Income tax on Mr Smith:
List price £19,205 @ 13% = £2,496 @ 20% = £499.33 per annum

 

Company’s position per car:
100% FYA on £19,205 @ 20% = £3,841
Class 1A NIC on £2,496 @ 13.8% = £344 per annum (reducing to £275 after CT relief)

• Full VAT reclaim on input tax on car servicing etc (unless registered for the Flat Rate Scheme).
• Corporation tax relief will be obtained at 20% on the running costs.
• Any business miles travelled can be charged at a rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter.

 

 

 

"Corporation tax relief will be obtained at 20% on the running costs (Insurance is likely to be very high if insured in the children’s own names so the tax relief could be significant)."