Tax on Company Cars

Company cars

From 6 April 2002 the charge on the benefit of a company car has been graduated according to carbon dioxide (CO_²) emissions.

This tax charge replaced 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. For cars with a petrol engine with an approved CO_² 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:

CO₂ emissions of vehicle (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:

2010/11 car benefit charge for petrol car with approved CO_² emission factor of 222 with list price of £18,000 is calculated as £18,000 x 33% = £5,940

2. For cars with diesel engines a 3% supplement will be added, subject to an overall maximum of 35%.

• Diesel cars achieving the clean level of Euro IV standard emissions and registered before 01/01/2006 will not be subject to the above diesel supplements.

For example:

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 (26 + 3)% = £4,350

3. Cars with no approved CO_² emissions and cars registered before
1 January 1998 are taxed according to engine size as follows:

Fuel benefit

Where an employer pays for any fuel used privately by an employee, there is an additional scale charge based on the size of the car's engine. Scale rates for the tax year 2001/02 are as follows:

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.

Tax-free benefits

Car parking

The provision of a car parking space either at or near an employee's place of work is not currently an assessable benefit.

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.)

'Lower-paid' employees

The provision of a car for an employee (not a director) who is paid at a rate of less than £8,500 per year including the value of all benefits & reimbursed expenses does not attract any charge to car or fuel benefit.

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:

If more than the above 'approved mileage allowance payment' (AMAP) is received, tax is payable on the excess.

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.

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