COMPANY CARS

• The type of car provided to an employee

• The number of business miles travelled

• to encourage manufacturers to produce cars which are more environmentally friendly; and
  
  
• to give company car drivers and their employers a tax incentive to choose more fuel-efficient vehicles.
  

The existing business mileage and age related discounts will be abolished. This is at least in part because the government believes that up to 300 million business miles may be driven unnecessarily each year in order to reach the mileage discount thresholds.

Percentage charges
As under the current regime, the percentage charge for the majority of cars will be between 15% and 35%. The new emissions table is set out below.

Jane was provided with a new company car, a Mercedes CLK 430, on 6 April 2000. The list price is £50,000. The CO2 emissions are 281 grams per kilometre. Jane regularly drives 20,000 business miles each year.

Jane's benefit in kind in 2000/01 and 2001/02 will be £50,000 x 15% = £7,500

In 2002/03, the taxable benefit will be £50,000 x 35% = £17,500

Her taxable benefit has increased by 133%.

Phil, on the other hand, has a company car, a BMW 318i, which had a list price of £21,000 when it was provided new on 6 April 2000. Phil does fewer than 1,000 business miles each year. The CO2 emissions are 188 grams per kilometre.

Phil’s benefit in kind in 2000/01 and 2001/02 will be £21,000 x 35% = £7,350

In 2002/03, the taxable benefit will be: £21,000 x 19%* = £3,990
*rising to 21% in 2003/04 and 23% in 2004/05.

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Diesels
Diesel cars emit less CO2 than petrol cars and so would be taxed on a lower percentage of the list price than an equivalent petrol car. However, diesel cars emit greater quantities of air pollutants than petrol cars and therefore a supplement of 3% of the list price applies to diesel cars. For example, a diesel car that would give rise to a 22% charge on the basis of its CO2 emissions will instead be charged at 25%. The maximum charge for diesel is capped at 35%.

The 3% supplement will be waived if the car achieves the clean level of Euro IV standard emissions.

Obtaining emissions data
The Vehicle Certification Agency produces a free guide to the fuel consumption and emissions figures of all new cars. It is available on the internet at http://www.vcacarfueldata.org.uk/. These figures are not however necessarily the definitive figures for a particular car:

• For all cars first registered from 1 March 2001 onwards, the definitive CO2 emissions figure is recorded on the Vehicle Registration Document (V5).
  
  
• For cars first registered between 1 January 1998 and 28 February 2001, the definitive figure is found by going to http://www.smmt.co.uk/. This is a service provided by the Society of Motor Manufacturers and Traders (SMMT).

Factors that won’t change

• The list price of a car will still be the price when it was first registered including delivery, VAT and any accessories provided with the car or subsequently made available (unless they have a list price of less than £100).
  
  
• The list price will continue to be restricted to an upper limit of £80,000.
  
  
• Employee capital contributions up to £5,000 reduce the list price.
  
  
• The benefit will continue to be proportionately reduced if the car is unavailable for part of the year.

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There will be winners and losers under the new regime. In general, the winners will be those with relatively modest cars driving few business miles, while the losers will be those driving at least 18,000 business miles a year in high specification models.

For individuals in this latter category, it may be time to revisit the issue of the tax-efficiency of continuing with the company car beyond 5 April 2002.

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