AT time of writing, oil prices have just fallen 2.5 per cent to a new six-year low.
AT time of writing, oil prices have just fallen 2.5 per cent to a new six-year low. The cost of petrol in the UK is being cut in response to the fall with Asda cutting its forecourt price by a further 2p a litre to 103.7p.
Whilst this is welcome news for those businesses involved in haulage and distribution, how might the lower prices affect the decision to have a company car in your business?
HMRC has published an updated company car ‘ready reckoner’ which shows the appropriate percentage for calculating the benefit charge on company cars for the tax years through to 2016/17, depending on the fuel type and the car’s CO2 emissions.
The table clearly shows how the cost of the benefit rises steeply for each tax year if the car remains the same, due in large part because the zero rate introduced in 2010/11 comes to an end in April 2015.
For example, the car benefit for a petrol company car purchased in 2011/12 with emissions of 120g/km was 10 per cent of that car’s list price. However the benefit charge for the same car will increase to 17 per cent, 19 per cent and 21 per cent of the car’s list price for tax years 2014/15, 2015/16 and 2016/17 respectively.
Therefore, if you are running an older company car you may wish to consider switching to a newer vehicle at a similar price but with lower emissions to prevent the car benefit charge from escalating.
Alternatively, you may wish to opt to buy the car personally and claim an increasingly generous mileage allowance (in comparison to actual petrol costs) of 45p for the first 10,000 miles and 25p per mile thereafter. The mileage rate is designed to cover all motoring costs for the car, including insurance and repairs but on a new car the latter would be at a minimum. The mileage claim is fully deductible for tax purposes and VAT can also be claimed. Please note that detailed mileage records do need to be maintained to support the claim should the HMRC ever wish to enquire into your affairs.
For more information, contact Elsby and Co on 01604 678470 or visit the website www.elsbyandco.co.uk
