Tax and Your Company Car

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There are many factors which will influence your choice of company car. These can include the distance you travel, terrain covered, the price, your lifestyle and perhaps even your clients. However, is tax ever a consideration?

The start of the tax year saw an increase in the company car rates and indeed the rates are increasing quite significantly year on year. Assuming however that you have some degree of choice over the car make and model, you can influence the tax that you pay.

The two factors which determine the tax charge attached to a company car are the list price of the vehicle and its CO2 emissions.

The table below shows the benefit in kind charge for cars with various, hypothetical,  list prices and CO2 emissions.  The rates applicable to the current tax year (2017/18) have been used.

List price CO2 emissions Fuel type Benefit in kind value
£17,000 102g/km Petrol £3,230
£25,000 99g/km Petrol £4,500
£25,000 117g/km Diesel £6,250
£35,000 0g/km Electric £3,150
£50,000 41g/km Electric/Petrol £4,500
£50,000 155g/km Diesel £16,500

In addition to the company car benefit there is also a fuel benefit if the employer provides fuel for private use; the value of the fuel benefit is affected by the CO2 emissions but not by the list price.

Although tax will not be the only issue affecting your choice of company car, perhaps it ‘auto’ be a consideration?

If you’d like any more information please contact Green & Co Accountants.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Advisory Fuel Rates from 1st June 2017

Fuel rates

For employees using a company car, the new fuel rates for use from 1 June are as below:

Engine Size Petrol LPG Diesel
Amount per mile (in pence)
1400cc or less 11 7 9
1401cc to 1600cc 14 9 9
1601cc to 2000cc 14 9 11
Over 2000cc 21 14 13

For the purpose of fuel rates, hybrid cars are treated as either petrol or diesel cars.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Advisory Fuel Rates from 1st March 2017

petrol pump nozzle with golden gas drops

For employees using a company car, the new fuel rates for use from 1st March are as below:

Engine Size Petrol-amount per mile LPG-amount per mile Diesel-amount per mile
1400cc or less 11 pence 7 pence 9 pence
1401cc to 1600cc 14 pence 9 pence 9 pence
1601cc to 2000cc 14 pence 9 pence 11 pence
Over 2000cc 20 pence 14 pence 13 pence

For the purpose of fuel rates, hybrid cars are treated as either petrol or diesel cars.

HMRC Not So Fine with Parking Fines

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HMRC’s position on parking fines is reinforced in the recent case of G4 Cash Solutions (UK) Ltd v HMRC [2016] TC5015. The first tier tribunal decided in favour of HMRC and disallowed tax relief for car parking fines imposed.

The issue arose as the company’s drivers incurred parking fines which G4S claimed were due to the awkward location of the customer’s premises. Rather than lose the custom, G4S accepted the fines and claimed them as an expense in their accounts.

G4S argued that the fines were incurred when exercising the trade; they were unavoidable and it was a commercial decision to pay them.

The tribunal countered that although breaching the law was as a result of the trade’s activities, it was not part of the trade and the fines incurred were therefore not tax deductible. G4S received 10,000 penalty notices per year from 2008 to 2010 which had resulted in tax relief of £580,000. One would hope that G4S has a “back-up” plan.

Green & Co have a dedicated tax department who can advise on allowable expenses, to speak to one of our team, contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Home To Work Travel

Hand shifting the gear stick

A recent case from the European Court of Justice (ECJ) has ruled that workers travel to and from a non-permanent place of work must be included as “working time”.

Examples of employees who may fall into this bracket include:-

  • Mobile engineers
  • Salespeople
  • Carers

In the past, these will not have had their travel time to/from their first/last business call of the day counted as working time.

Issues for employers

Employers will need to ensure that, now the time of travel is included as work time, employees do not breach the Working Time Directive (WTD) threshold of 48 working hours per week. If the inclusion of travel now takes workers over this limit, employees can waive their rights to this limit, but are not obliged to do so.

Also, employees are entitled to 11 hours uninterrupted rest in every 24 hour period. Again they can waive their rights to this law, provided there is no foreseeable risk to employee safety.

Wage implications

The impact on wages is less clear. There is a contradiction between the National Minimum Wage (now the National Living Wage {NLW}) and the case presented in the ECJ. Where employees are paid hourly, it seems fair for them to claim payment for this travel time.

However, the NLW legislation indicates that time taken to travel from workers residence to place of work is not counted as working time for pay purposes.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

You Auto Know The Car Pool Criteria!

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If you provide your employees with a car which you deem a pool car, then you must ensure that this is a pool car within HM Revenue & Custom’s definition. If HMRC enquire and find that the car should in fact be treated as a company car, then they will enforce this treatment, along with any corresponding tax, national insurance, penalties and interest.

A pool car should be made available to, and actually used by, more than one employee by reason of their employment.  Also, it should not ordinarily be used by one employee to the exclusion of the others.

In the case of each of employee who uses the car, any private use of it should be merely incidental to the employee’s other use of it in that year, and a pool car would not normally be kept overnight at, or in the vicinity of, the employee’s home.

Employers should have a clear pool car policy and be able to demonstrate that all employees have been made aware of the restrictions on private use of the vehicle. A log of the car’s mileage should also be kept in order to show who uses the car, and in what circumstances.

If any of the pool car criteria are breached, then it could mean that there is a company car benefit which should be declared to HMRC in the normal way. It’s important to get this right, otherwise an HMRC investigation could prove costly. It you are unclear on the treatment then it’s best to consult your accountant.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Ambro at FreeDigitalPhotos.net