Company cars: reducing the cost of business motoring
Over recent years, the cost of motoring has increased significantly, partly as a result of regular increases in fuel prices. However, the provision of a company car is not just a preferred option for some employers and employees, but a necessity and minimising the costs in terms of income tax and NIC on the benefit in kind should be a priority.
Fuel for private use
The car fuel benefit is an all or nothing charge and both employers and employees should ensure that this is taken as a benefit only if it is cost effective. The tax and NIC cost of the benefit should be considered against the cost of fuel incurred on private use of the company car. For employees using a company car for minimal amounts of private use (don't forget to and from the office is private use), the provision of fuel for private use is most likely not cost effective and should be withdrawn.
Company vans
There are two types of exemption available which result in no taxable benefit for the employee and no NIC charge for the employer on the provision of a company van. The first is where there is insignificant private use and the second is where the van is made available mainly for business travel and personal use is restricted to the user's commuter journey.
Petrol/electric hybrid cars
For the tax years up to 2011/2013 qualifying low emissions cars (QUALECs) with CO2 emissions up to the lower limit of 120g/km are limited to a car benefit of 10% of the list price, and a car fuel benefit of 10% of the fuel scale charge. With effect from 2012/2013, a new system applies, such that cars with CO2 emissions below 99g/km will have a 10% benefit charge and each 5g/km increase in emissions will result in a 1% increase in the charge to a maximum of 35%.
Enhanced capital allowances on cars with low CO2 emissions
New cars acquired before 31 March 2013 with CO2 emissions below 110g/km qualify for 100% first year capital allowances. The special rules on annual restricted writing down allowances of £3,000 for cars costing more than £12,000 do not apply to cars with CO2 emissions below 110g/km.
