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Company Car Conundrums! (Part 3)

Shared from Tax Insider: Company Car Conundrums! (Part 3)
By Lee Sharpe, September 2014
Lee Sharpe provides further checklists covering the main issues relating to company car and company van taxation.

The following article continues the series of checklists to help business owner-managers work out if there are taxable car/fuel benefits in kind. We shall initially look at the car fuel benefit calculation, then the calculations for vans. References are to HMRC’s Employment Income manual (EIM) and to legislation in the Income Tax Earnings & Pensions Act 2003 (ITEPA 2003).

Car fuel benefit calculation
The benefit is based on a fixed annual amount, which tends to increase every year, together with the appropriate rate based on the company car’s CO2 emissions as follows:

 

Car Fuel Benefit Calculation*

£

£

1

Ascertain the car's approved CO2 emissions (same as for car benefit)

 

gCO2/km

per the V5C document or go to http://carfueldata.direct.gov.uk/search-new-or-used-cars.aspx

Rounding down to the nearest 5g CO2/km, use the ready reckoner at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/258954/tc2b.pdf

to determine which percentage to apply for the tax year.

 => %age:

 

Note special rates apply to zero- and ultra-low emissions cars as per the reckoner, and a 3% supplement for diesel cars which is due to cease in April 2016.

Note that the 'absolute' cap of 35% of adjusted list price will also increase from 2015/16 up to 37%

2

Multiply by the Car Fuel Benefit Charge Multiplier - (£21,700 for 2014/15)

x

21,700

This is the Car Fuel Benefit Charge for a Full Year:

=

3

Restrict for any periods for which car unavailable (same as for car benefit)

Restrict the charge on a time basis for periods:

Prior to its first being made available in the tax year

+

After it was permanently withdrawn in the tax year

+

Or an intervening period of not less than 30 consecutive days for which it was unavailable (e.g., for repairs) - assuming no replacement car provided

+

 

-

 

4

Reduction for permanent withdrawal of private fuel

For periods where the car is unavailable AND fuel has been withdrawn, there should be only one proportionate reduction. Note that if private fuel is re-introduced later in the year, there is NO restriction under this heading.

-

 

5

Apportion benefit if the vehicle is shared (same as for car benefit)

Where two or more employees share the car over the same period, then the benefit in kind should be restricted for each on a just and reasonable basis, effectively apportioning the annual benefit between users. See EIM25575

Adjusted car fuel benefit for the tax year

=

 

*For cars with UK manufacturers' list price and approved emissions, registered from March 2001. See also EIM25500 et seq.

 

 

Van benefit calculator

£

£

Remember that private use has to be "significant" to trigger a van benefit charge

1

Van benefit charge for the full tax year (£3,090 for 2014/15)

3,090

Note that "zero-emissions vans" - which cannot produce CO2 at all - have £0 benefit in kind for 2014/15, rising to the full rate over the next few tax years - see EIM22790

2

Reduction for period(s) van was unavailable

Restrict the charge on a time basis for periods:

Prior to its first being made available in the tax year

+

After it was permanently withdrawn in the tax year

+

Or an intervening period of not less than 30 consecutive days for which it was unavailable (e.g., for repairs) - assuming no replacement van was  provided

+

 

-

 

3

Apportionment if the van has been shared

Where the van has been shared (and made available for private use) concurrently between employees, then the charge should be apportioned between them - each employee getting a reduced benefit - on a just and reasonable basis.  Note that HMRC objects to reducing one employee's private use where the co-sharer employee's private use is not significant (see EIM22830) so essentially the benefit must be shared rather than simply reduced.

-

 

4

Reduction where employee pays for private use

The benefit is reduced pound for pound, where the employee pays for the private use of the van. Note that the payment must be required - it cannot be voluntary. It can reduce the benefit to nil.

-

 

Adjusted van benefit for the tax year

=

 

Van fuel benefit calculator

Again assumes private van use more than "insignificant" and private fuel provided

1

Full annual van fuel benefit (£581 for 2014/15)

581

2

Restrict for any periods for which van unavailable (same as for car benefit)

Restrict the charge on a time basis for periods:

Prior to its first being made available in the tax year

+

Lee Sharpe provides further checklists covering the main issues relating to company car and company van taxation.

The following article continues the series of checklists to help business owner-managers work out if there are taxable car/fuel benefits in kind. We shall initially look at the car fuel benefit calculation, then the calculations for vans. References are to HMRC’s Employment Income manual (EIM) and to legislation in the Income Tax Earnings & Pensions Act 2003 (ITEPA 2003).

Car fuel benefit calculation
The benefit is based on a fixed annual amount, which tends to increase every year, together with the appropriate rate based on the company car’s CO2 emissions as follows:

 

... Shared from Tax Insider: Company Car Conundrums! (Part 3)
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