Expat Tax
Company Cars
(If you're unlucky enough to have to fill in a UK income tax return and have a company car, here's a handy guide to your tax liability for it.)
Since 6 April 2002 the charge on the benefit of a company car has been graduated according to carbon dioxide (CO2) emissions.
This tax charge replaces the previous scheme which included reductions for business mileage (including those for second cars) and for older cars. These reductions no longer apply.
Charges
1. Petrol engines
For cars with a petrol engine with an approved CO2 emissions figure, the charge will build up from 15% of the car's list price in 1% steps, dependent upon the level of emissions, in accordance with the following table:
% of car's
price taxed2004/05 2005/06 2006/07
- The exact CO2 figure is rounded down to the nearest 5 g/km
- The price of the car, for tax purposes, is the UK list price of the car on registration plus car tax, VAT, delivery charges and relevant accessories.
For example:
2004/05 car benefit charge for petrol car with approved CO2 emission factor of 212 with list price of £18,000 is calculated as £18,000 x 28% = £5,040
2. Diesel engines
For cars with diesel engines the following supplements will be added:
CO2 emissions
2003/04 & 2004/05 (g/km)Supplement Up to 250 255 260 above 260 no further supplement (maximum charge reached)
- Diesel cars achieving the clean level of Euro IV standard emissions will not be subject to the above diesel supplements (this exemption will be withdrawn from 1 April 2006).
For example:
2004/05 car benefit charge for diesel car (Euro IV not achieved) with approved CO2 emission factor of 187 and list price of £15,000 is calculated as £15,000 x (21+3)% = £3,600
3. No approved CO2 emissions
Cars with no approved CO2 emissions and cars registered before 1 January 1998 are taxed according to engine size as follows:
Engine size
No approved emissions
Cars registered before 1.1.98
up to 1,400cc
15%
15%
1,401-2,000cc
25%
22%
over 2,000cc
35%
32%
Fuel Benefit
To calculate the benefit charge the CO2 percentage figure is multiplied against a set figure. For 2005/06 (unchanged from 2004/05) the set figure is £14,400 (e.g. the 2004/05 fuel charge for a car with CO2 emissions of 240g/km is 14,400 x 34% = £4,896).
These standard charges are subject to Income Tax at the lower, basic or higher rates, depending upon the employee's overall liability for the year. The tax due is usually collected under the PAYE system via an adjustment to the employee's code number.
Fuel only mileage rates
Where employees are reimbursed for the cost of fuel used for business travel in their company cars, the following "advisory fuel rates" may be used without triggering a tax or national insurance liability.
Engine Size
(all years)
(all years)
2004/05up to 1,400cc 1,401 - 2,000cc over 2,000cc
Business use of an Employee's own Car
Many employees are reimbursed for the business use of their own car. The maximum amount of mileage allowance that can be received without paying tax is as follows:
First 10,000 miles: 40p per mile thereafter: 25p per mile
If more than the above "approved mileage allowance payment" (AMAP) is received, tax is payable on the excess.
Tax-Free Benefits
1. Car Parking
2. Pool Cars
There is no tax charge for using a pool car. (A pool car is defined as one where private use is "merely incidental" to business use, where it is not normally used by any single employee to the exclusion of others, and where it is not normally kept overnight at or near an employee's home.)
3. "Lower-paid" Employees
4. Vans
For 2004/05 the taxable benefit for private use of a company van including fuel is £500 (£350 for vans over 4 years old). From 6 April 2007 the scale charge will increase to £3,000 with an additional £500 charge for private fuel.
Reporting Details
Provision of company cars and fuel benefits must be reported on a form P11D/P9D for directors and relevant employees.
Mileage payments in excess of the approved allowances must also be reported on form P11D/P9D. The individual then makes a claim for the approved allowance by completing the appropriate section on his or her tax return.
Please note: This guide is intended to provide basic information only. Where specific advice is required, we recommend that you seek proper professional help; either from Just Tax or other suitably qualified person or practice.
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