Company Car Benefit Rules

   Car Benefit

Company Car Benefit: Special Rules

In addition to the basic calculation of company car benefit from a car's List Price and CO2 output there are further rules to take account of special factors.

Here's a summary of the key special rules:

Diesel Cars

Cars fuelled by diesel are subject to a surcharge of 4% of List Price (subject to a maximum taxable benefit of 37% of List Price) except where they meet the new 'Real World Driving Emissions' legal requirements (known as 'RDE2').

Second Cars

If more than one company car is provided then each car is treated as a separate taxable benefit calculated according to list price, CO2 output etc.

Hybrid Powered Cars

Cars using hybrid electricity and internal combustion engines use the same percentage as the appropriate petrol/diesel engined percentage benefit rate.

Gas Powered Cars

Cars running on gas (e.g. Liquefied Petroleum Gas – LPG - and Compressed Natural Gas – CNG) with a recognised gas-based CO2 output are taxed according to the equivalent petrol powered car with the same emissions.

Cars running on gas but without a recognised gas-based CO2 output (for example, where the gas fuel equipment is fitted after the car has been delivered) will be taxed on the equivalent petrol CO2 output of the car, but any additional cost of the car related to equipping it to run on gas will be ignored when calculating the car’s taxable List Price.

No Recognised CO2 Output/Pre-1998 Cars


If a company car has an internal combustion engine and either does not have a recognised CO2 output or was first registered before 1 January 1998 then the following percentages of List Price will apply:


Car with no CO2 rating
or
Cars first registered
before 01/01/1998:


 
Engine
Capacity
% Of
List Price
 

1,400 or less
15%
1,401-2,000
25%
2,001 or more
35%


Capital Contributions

If you contribute towards the purchase price of your company car (the 'capital cost') then your 'capital contribution' can reduce your annual taxable benefit.

Each £1 that you contribute towards the cost of your company car reduces the taxable List Price.

For example, if your car costs £20,000 and you contribute £1,000 towards the capital cost then the List Price is reduced by £1,000 to £19,000 when calculating your taxable benefit.

There is a limit to the amount of your capital contributions that will qualify for reducing the List Price for tax purposes.

Currently the maximum is set at £5,000, so if you contribute £6,000 then only the first £5,000 will qualify for reducing the taxable List Price of your company car.

Private Use Contributions

If you are required to make a financial contribution as a condition of your company car being available to you for private motoring, your contribution will normally reduce the annual taxable benefit of the car.

Each £1 that you pay during the tax year as a private use contribution reduces your annual taxable benefit by £1.

For example, let’s assume you pay £50 per month as a private use contribution (i.e. £600pa).

If your car's List Price is £20,000 and the CO2 derived taxable percentage is 20, the standard annual taxable benefit of your car would be £4,000pa (£20,000 x 20%).

The £4,000pa benefit is then reduced for the £600pa private use contribution, which makes the annual company car benefit £3,400pa.

The maximum tax-deductible private use contribution you can make in any tax year is equal to the taxable benefit of your company car.

For example, if your annual taxable benefit is £4,000 then the maximum private use contributions for which you can obtain a tax deduction is £4,000.

A negative taxable benefit (and therefore a tax refund) cannot be created by making a private use contribution greater than the annual benefit of your car.

'Top-Up' Contributions

If you contribute towards the costs of obtaining a company car of a higher specification than your normal entitlement then your “top-up” contribution is only allowed as a deduction from your taxable benefit if it is a condition of the car being available to you for private use.

If the “top-up” contribution is simply a condition of the higher specification car being provided to you then the contribution is not normally tax deductible.

It is therefore usually advisable to have your employer write to you specifying that any private use contribution is required as a condition of the car being made available to you for private use, particularly if the contribution includes a “top-up” for a higher specification car being provided.

Availability

If your company car is unavailable to you for 30 consecutive days or more (perhaps for repairs) your car benefit (and your fuel benefit if appropriate) is reduced to take account of this.

During a tax year, periods before your company car first becomes available for your private use and periods after your car stops being available are ignored for taxable benefit purposes.

In addition, if your car becomes temporarily unavailable for 30 or more days then your taxable benefit is reduced by the number of days involved.

For example, let’s assume that your car has a taxable List Price of £20,000, a taxable percentage of 20% of List Price applies and your car is unavailable due to repairs for 31 days during the tax year.

Your annual taxable benefit for the year would be:

Manufacturer’s List Price £20,000 x 20% = £4,000
Availability Adjustment: £4,000/365 x 31 = £340
Availability Adjusted Taxable Benefit = £3,660 (£4,000 - £340).


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(+44 1792 224319 outside UK)

info@drivesmart.co.uk