New Company Car Tax Rules

With effect from 6th April 2002, new rules were introduced for calculating the personal income tax charge on the Benefit in Kind (BIK) of being provided with a company car. These build on the Government's stated ambition of introducing legislation which produces environmentally friendly results.

The old rules for calculating this BIK were based on the following:

• Manufacturer's list price,
• Business mileage (relative to annual thresholds of 2,500 and 18,000 miles),
• Age of car (relative to a benchmark of 4 years old at the end of the tax year).

The new rules will now be based on the following:

• Manufacturer's list price,
• Carbon dioxide emissions,
• The fuel the vehicle runs on.

The net effect of this change will depend upon an individual's current circumstances. There will be both winners and losers under the new regime, as indicated by the following example:

Employees and directors who are currently thinking of changing their company car, need to understand the future tax implications.

Whiting & Partners have access to the emissions data for all new cars and are able to advise clients on their future tax exposure under the new regime. In addition, a comparison can be made of whether it is more appropriate for individuals to be given a pay rise to enable them to own and expense the car privately, before charging the employer a pence per mile expense for business travel.

Practical Examples of our Benefits in Kind Expertise

Minimising the tax cost of operating a vehicle for both business and private useage. Advising on whether a car is most tax efficiently owned and expenses within the business or personally.

Advising on salary sacrifice and employer funded pension contributions. Convincing the Inland Revenue that outstanding tax should be waived when it originates from their coding errors/delays.