The new company car regime whereby the benefit in kind for tax purposes is based on the CO2 emissions of the car rather than the level of business mileage and the age of the car has been in force since April 2002. The scheme was well publicised in the run up to its introduction. However that didn’t stop the Inland Revenue getting many PAYE coding notices wrong! The purpose of this article is not to remind you of the rules on company cars but to let you know of a couple of associated points.
When the new rules for cars were introduced the Inland Revenue said that they were reviewing the position on company vans. Currently the maximum annual taxable benefit for a company van is £500 whatever its list price and CO2 emissions. Therefore a company van can be considerably cheaper than a company car. Not surprising therefore that manufacturers responded by introducing dual purpose vehicles commonly referred to as ‘double cab’ pick-ups which would they hoped be treated as vans for tax purposes. The Inland Revenue has responded by adopting the Customs and Excise definition of van for these purposes so that a double cab pick-up with a payload of one tonne or more will be treated as a van but below that level will be treated as a car. Manufacturers should be able to provide guidance but the bottom line at least for this tax year is that some of these vehicles will be taxed as vans and some as cars. What an unsatisfactory state of affairs. The whole position is likely to be reviewed in advance of the next tax year so watch this space.
Many of you will be aware that an additional tax charge arises where in addition to a company car, free fuel is provided by your employer for private motoring. The charge is only worth bearing these days where you do a significant number of private miles - typically in excess of 10,000. Remember that for the current tax year the charge is an all or nothing one so that if any private fuel is provided the full annual charge is levied. This can sometimes be a problem in situations where you think that only business mileage is being paid for by your employer. Imagine that every time you do a business journey and claim mileage costs back from the company you round the length of the journey up to the nearest 10 miles. Strictly the employer is then reimbursing you for some private mileage and the full fuel scale charge could be applied. The Inland Revenue has been known to take this point when the PAYE auditor comes to visit so be on your guard and try to be precise about the length of business journeys.