 |
||||
|
|
||||
|
|
Are you looking for Car
Taxation – Employee OR Car
Taxation – Employer – Van
Taxation – Vehicles and VAT CAR TAXATION - EMPLOYEEOn this
page you will find details how car taxation effect the employee, P11D, Co2
emissions, Benefit in Kind taxation (BIK), Car
Fuel Benefit and the Fuel Benefit Charge (FBC), Opting
out of the Company car and AMAPs
(Approved Mileage Allowance Payments) If you are a director or an employee earning more than £8,500 p.a. when you have the benefit of a company car, you become liable to Benefit in Kind (BIK) taxation. The amount you pay depends on the P11D price (approximately the list price) of the vehicle and its CO2 emissions. The P11D price and CO2 emissions of a vehicle should be freely available from the car manufacturers or of course from ourselves. (CO2 Emissions are shown on the V5 – Vehicle Registration Document) The P11D is the list price of the car, the day before it was registered, including delivery charges but excluding Road Fund Licence and 1st Registration Fee. N.B. this is not the price you pay for the car. Any extras fitted to the car including items fitted after the vehicle is delivered, e.g. a tow bar, should be included in this figure. The official CO2 should then be rounded down to the nearest band, see below, and the percentage obtained. – Note the two columns for petrol and diesel engines. Please note some extras; automatic transmission, alloy wheels, wider tyres etc. can have an impact on the Co2 emissions figure for the standard vehicle.
Take this percentage of the P11D price to get the taxable Benefit In Kind (BIK). The amount of tax you will pay then depends on your highest tax band 20%, 22%, 40%? Example: For the period 2005-2008 if you are driving a petrol vehicle with a P11D value of £20,000 and Co2 emissions of 198 you will have a taxable BIK of £5,200 (198 Co2, rounded down to 195. As it is a petrol vehicle the percentage is 26%, £20,000 x 26% = £5,200) You will then pay tax, on this taxable BIK of £5,200 at your personal tax rate. At 40% - £2080 per annum or £173.33 per month At 22% - £1144 per annum or £95.33 per month At 20% - £1040 per annum or £86.66 per month There are special rules and regulations for:
If you would like further information, clarifications of any of the issues or a more personal calculations please contact us. Car
Fuel Benefit
If your employer pays for the fuel that you use for private miles – this includes travel to and from a regular place of work. You will have to pay Car Fuel Benefit. Now based on a government set Fuel Benefit Charge (FBC) of £14,400 rising to £16,900 from April 2008 the taxable benefit is calculated by taking the CO2 percentage of your car and applying this to the FBC. Example: Tax Years 2008/2010 - Petrol Car with CO2 emissions of 194 16,900 x 26% = Taxable benefit or £4394 @ 40% = £1758 per annum or £146 per month @ 22% = £967 per annum or £81 per month @ 20% = £879 per annum or £73 per month We suggest you ensure that you are not paying more in taxation than the actual cost of the private fuel used. This will depend on your rate of tax and the fuel consumption of the vehicle as well the amount of private miles you travel. You can buy a lot of ‘free’ fuel for £146 per month! As mentioned above regular commuting from
your home to your normal place of work is counted as private mileage. The
rules regarding these aspects are quite complex especially if you are on
secondment or travel to various sites. Please feel free to contact us to
discuss for further clarification. By
going down this route you have no taxable BIK and hence save yourself the
taxation every month, your salary cheque will be larger due to less tax
payable but you do not have a car!
Your
employer will usually offer you additional salary to compensate and could
also offer you ‘pence per mile’ (PPM) for your business mileage. This
amount could vary between just sufficient to cover the cost of the actual
fuel used or could be more generous and would in fact make a contribution
to the running costs. The added salary will be taxable but the (PPM)
payment for business mileage is tax free up to certain limits set by the
Inland Revenue each year. These are known as 'authorised mileage rates'.
Remember!
Now you don't have a company car it will be down to you to purchase,
maintain and service the car. You will also have to pay the Road Fund
Licence and insurance (this will also have to cover you for business use).
You will have to pay the financing charges and suffer the loss in value
over the period, purchase tyres, roadside assistance and of course the
fuel itself. Don't underestimate the cost of all of this. Although you
will be saving benefit in kind tax, this along with your net salary
increase and any contribution via payment for business mileage will need
to cover all these costs. Approved Mileage
Allowance Payments (AMAPs) These are the maximum amounts that can be received without paying tax or NIC. If you receive less than the stated maximums the difference can be claimed as tax relief. This can be done within your self-assessment tax return at the end of the tax year but can also be built into your tax code, so that you receive the benefit now. The
maximum amounts you can receive tax-free are quoted below.
To
encourage eco-friendly car sharing, employers can pay additional pence per
mile per passenger tax-free to the driver. From April 2002 this will be
0.05p. We recommend that employees check with their insurance company that
they are satisfied that these payments do not constitute ‘hire and
reward’. The
budget of 2007 stated that the Government are considering changes to AMAPs
to promote environmentally friendly business travel.
By offering a company car to any
employee earning more than £8,500 pa or any director, it will mean that
they will incur a taxable Benefit in Kind (BIK) – for further details
see Car Taxation – Employee, as an alternative you could offer your
employees an increase in salary to ‘opt out’ and purchase their own
cars, this could mean the company makes savings on:- ·
Time spent on purchasing and managing
the fleet ·
Administration and tax reporting ·
Class 1A NIC on the Benefit in Kind ·
Acquisition and funding cost ·
Maintenance and servicing costs as well
as Road Fund Licence and Insurance But
you have to consider:
What will you need to offer your employees: Additional salary - the net
amount after tax, plus the savings they will make by not paying Benefit in
Kind tax will need to be a sufficient incentive for them to opt out or at
least keep them as satisfied employees. We find most employees
‘dissatisfaction’ with any company car scheme is the fact that they feel
they are paying too much tax – most forget that the Inland Revenue would
most probably take as much, if not more, from any increase in salary – a
well researched lower emission vehicle may be all that is required to
halve their tax bill. What about the things you
don’t always think of:
§
Just
like running your own fleet you still need to check on a regular basis
that each driver holds a current valid driving licence. §
If
you do offer a company car do you pay for the fuel for the drivers
personal miles? §
Your new star employee has a bad credit
history and can't finance a vehicle, what do you do then? §
Your employee gets divorced and the
partner gets the car! §
Your employee is off long term sick and
the car is repossessed! §
Personal
insurance for your employee is three times the cost it was on a fleet
policy and they can't insure the type of car they were previously driving!
§
Do you restrict vehicle choice – will
a Porsche Boxster or a 4x4 fit the company image? §
Their vehicle gets ‘written off’
and they are left with a £3,000 shortfall on what they owe on finance. §
You want to move the employee to an
office based role but they are still paying for a car contract on 30,000
miles for year – do you still pay them the additional car benefit in
salary? §
Health and Safety regulations mean that
you, as the employer, are still legally responsible for the safety of
their car. How will you check that the car is safe and regularly serviced?
As well as the implications of the Corporate Manslaughter and Corporate
Homicide Act. Please
feel free to contact us to discuss your options. VAN TAXATION
For many years if you had the benefit of the use of a company commercial vehicle, you would pay tax on a flat rate of Benefit in Kind (BIK) of £500 including free personal fuel. From April 2007 this fundamentally changed, anyone whose personal use of a van is incidental, now does not have to pay any BIK. If unrestricted personal use is allowed you will then pay tax based on a flat rate of £3,000 plus £500 if you still receive free personal fuel. The definition of commercial vehicle always used to be clear cut – 1 row of seats and no side windows behind the driver. When double cab pick-ups and vans entered the market, for a time, technically, they would not have been seen as commercial vehicles. In
2000 this was clarified and they now do count as a commercial vehicle even
with rear seats and side windows, as long as they have the ability to
carry 1 tonne, (all double cabs in the UK will have been built to this
criterion) and are built to primarily carry goods rather than passengers. When someone purchases a car, VAT is
included in the price @17.5%. Unless you can prove to the Inland Revenue
that the vehicle is used 100% for business use, no VAT is reclaimable.
100% business use is not easy to prove and is normally only achieved by
such businesses as driving schools and self-drive hire companies etc. A
comprehensive mileage log needs to be maintained showing every trip, the
vehicle must be a pool car and can’t be allocated to one individual and
the vehicle must always be kept at the business premises i.e. never stored
at the directors or employees home. These rules affect all methods of
purchase where ownership is gained, or can be, i.e. payment in cash, bank
or other loan, Hire Purchase (HP) fixed or variable rate Balance Payments,
Lease Purchase (LP), Personal Contract Purchase (PCP), Contract Purchase
(CP). When a vehicle is leased the leasing company purchases the car – obviously they will not use the car personally so for them it is 100% business use and they will reclaim the VAT. When you lease from them they will calculate the figures based on the pre-VAT price and then charge you VAT on the monthly rentals. Inland Revenue rules allow 100% reclaim of VAT on leased vehicles for 100% business use but they will also allow 50% VAT reclaim even if there is personal use – this can be a major benefit being able to claim 50% of the VAT which you couldn’t claim back if the car was purchased. These
rules affect all methods of Leasing – long term rental – where the
hirer can never gain ownership, i.e. Finance Lease, also known as:
Leasing, Car Leasing, fixed period Lease, Lease, Lease Hire, Lease Rental
– many names for the same thing, and Operating Lease, which, for
vehicles, is always referred to as Contract Hire. Commercial Vehicles
Historically a commercial vehicle was defined as having one row of seats, no windows behind the driver and predominantly used for the delivery of goods. Double Cab Pickups and vans broke this rule and for some time they were defined as passenger cars. This has now been clarified and they now count as commercial vehicles as long as they have a carrying capacity of at least 1 tonne and are built to primarily carry goods rather than passengers. Irrespective of whether you purchase a van and ownership is gained (using cash or loan, Hire Purchase – HP, fixed or variable rate Balance Payments, or Lease Purchase – LP) OR Lease a van using Finance Lease or Contract Hire, you can claim 100% of the VAT. You
should note that Her Majesty’s Revenue and Customs (HMRC) can restrict
the percentage of VAT you claim on a commercial vehicle to the actual
percentage of business to total miles – this can be particularly
important to drivers of Double Cabs.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
