Tax Efficient Company Cars and FYA

As you are probably aware, the benefit in kind on company cars has hindered many organisations since that change in the way it is calculated. You will now be charged by the list price of your car and the CO₂ emissions.

My personal opinion used to be that the list price is the key here as I had a car which produced 205g/co2 but because the list price when new was only £15,500 the Benefit In Kind was only £78 per month. Compare the same emissions with a £30,000 priced car the Benefit increases to £157 per month. Since then car manufactures have massively reduced the CO₂  their cars produce, my current vehicle has a list price of £33,000 but because it is perceived to be green and low emissions the BIK is only £92 per month.*

*Please note this is based on a 22% tax payer, this rate will increase if you are in the 40% bracket!

Parkers website has a good calculator here to work out the monthly Benefits for company car drivers and I used this to help decide what vehicle we would buy.

Please find below the current vehicles that qualify for 100% FYA (first year allowance) the rate used to be cars producing under 120g CO₂ but this rate has now been lowered to 110g CO₂ as from 1st April 2008.

Petrol Vehicles under 110 CO₂

Diesel Vehicles under 110 CO₂

The Mini Diesel is the stand out vehicle here, as it is likely to have the lowest depreciation of the vehicles listed and retain its style.

However it is not and neither are the others listed, likely to be favoured by a Company Director, we have found it very rare that our clients are remotely interested in any of the vehicles which qualify. However, there are many cars which are very tax efficient from a Benefit In Kind perspective.

Our current recommended favourites are from BMW.

The BMW 1 Series 118D as a diesel engine  with a BIK of under £50 per month and excellent build quality, has approximately 60 miles per gallon and with all that is still no slouch!

The 3 series BMW's are also very efficient, a BMW 320d Coupe for instance lists 57 MPG and the BIK is £92 per month for 2009/10.

If a car you are interested in is not listed or choosing a company car is proving difficult as you are unsure what the liabilities would be, then please contact us.

Capital Allowances on Business Cars

Legislation in the Finance Bill 209 introduces a reform of the regime for the capital allowances for cars bought by businesses. This legislation commences fro the 1st April for Corporation Tax and 5th April 2009 for Personal tax.

The current rules that restrict allowances on cars costing more than £12,000 has been abolished and will now be allocated in to 1 of 2 pools:

1. The General Pool (20% allowance) for cars with emissions not exceeding 160g/km of CO₂
2. The Special Pool (10%) for cars with emissions exceeding 160g/km of CO₂

These rules dramatically reduce the timing of any tax relief and please contact us for further details