Company car tax considerations

THE company car is an important part of the remuneration package for many employees, but is your business motoring strategy as tax-efficient as it could be?

I am frequently asked what the tax implications are of a company buying a car, providing fuel or buying a van for an employee or director.

Here I have summarised the main points to consider and also highlight some of the changes that are coming into force later this year.

Firstly, you might consider switching to a company car with low CO2 emissions to save tax.

There are reduced car benefit rates for ‘environmentally-friendly’ cars – either those that don’t emit CO2 or those emitting up to 75g/km.

Alternatively, an employer-provided van can also result in tax savings. Unrestricted use of a company van results in a taxable benefit of £3,000, with a further £564 benefit if free fuel is also provided. The resulting tax bill can be up to £1,603.80, with an employer NIC bill of £491.83.

Limiting the employee’s private use to only home-to-work travel could reduce both figures to zero.

However, if replacing the company car fleet is not a viable option, consider whether you could benefit from paying employees for business mileage in their own vehicles, at the statutory mileage rates.

This may be particularly advantageous when business mileage is high.

Looking ahead, from the financial year 2014/15 the car fuel benefit charge multiplier will rise from £21,100 to £21,700 and the van fuel benefit charge will rise from £564 to £581.

Meanwhile, the van benefit charge will increase from £3,000 to £3,090.

In addition, the lower emissions threshold for company car tax will be reduced from 115g/km to 110g/km.

For more information email or call 01573 224391.