This year I have been involved with looking after companies benefits in kind. I have especially been interested in seeing how much tax they pay on letting their employees use the company cars. If you have a 'gas gussler' the tax charges now are astronomical so it should be time to consider another approach.
The system for taxing those who use company cars has seen annual increases in the cost of benefits. The main aspect of the charge is to tax a figure calculated by multiplying the car's list price by an emission-based percentage. There are various add on's such as an additional charge for Diesel cars.
The taxable element of the benefit continues to be up to a maximum of 35% of the list price of the car when first registered. The list price includes the full cost of the car, car tax, VAT and any other costs. Furthermore there is a CO2 table that provides the exact percentages with high powered cars having a very high percentage and thus proving very expenses for employees/directors.
From 6 April this year the rates of tax and National Insurance free approved mileage payments you can use are:
- 45p per mile for the first 10,000 business miles
- 25p for all subsequent miles
Having been involved in looking after companies P11D benefits this year I have seen Directors pay huge amounts of additional tax on company cars at 12.8%. Some of them do not even realise it would be as much as this.
Thus my advice would be if you have employee's/directors who do less than say 20,000 miles in a year I would just pay them the approved mileage rates rather than letting them use a company car as it will be more tax efficient.
Another option would be to consider a van instead of a car. The taxable benefit for the unrestricted use of company vans is £3,000 plus a further £550 of taxable benefit if fuel is provided by the employer for private travel.
There are certain cars that can meet the criteria of a van within the tax legislation and if you would like further information please contact me - mitch@ljd.uk.com
'Helping you and your business to count!'
Mitch,
ReplyDeleteI entirely with your most helpful advice. The problem for people like you and me is that the very people who could benefit most simply don't have the time - or say they don't - to read and take note of it!
Offering them a tax rebate - as HMRC is doing today for millions of PAYE taxpayers might do the trick!
Good luck with completing your CTA qualification.
Tom