The taxable benefit of a company car with private use is calculated using the list price and the CO2 emissions of the vehicle. With a reduction in the basic limit from 135g/km to 125g/km for 2011/12, more cars will be subject to the 15% charge with corresponding increases in Class 1A NIC charges.
There are however tax incentives for those using more energy efficient cars. The main points to note are:
- Cars with CO2 emissions of 110g/km or less will qualify for 100% capital allowances;
- Benefits are calculated on 10% and 5% of list price where cars have CO2 emissions of 120g/km or less and 75g/km or less respectfully;
- Reduced rates of Vehicle Excise Duty; and
- Exemption from the congestion charge.
The incentives are there to encourage employers to consider more efficient vehicles; however, we believe it may be more appropriate to provide the benefit of a “green car” to a family member perhaps in exchange for the sacrifice of salary. With a low benefit charge and no NIC charge, the employee will benefit overall from the arrangement whilst the employer will reduce their NIC exposure by paying a lower amount of Class 1A on the benefit.
Please call Martin Mann on 020 7182 4745 or your normal Gabelle contact for more information.