Important changes to the taxation of company cars

From 1st April, the rules surrounding the taxation of company cars have changed, affecting every company that buys, owns or leases a fleet of vehicles. This is the biggest change to affect company car tax since 2002.

At Dynamic Vehicle Solutions we’ve been working with customers over the past few months to implement changes to their fleet policies, but we understand that this is a complex issue and that many companies have yet to take action.

Under the new rules, the purchase price of the car will not determine the taxation treatment; instead it will move to an emissions based system. This will make it more tax-efficient to buy or lease a car emitting 160 g/km or less and more expensive to buy or lease one that emits 161 g/km or more.

The proportion of the finance cost disallowable under corporate car tax calculations will also change to being emissions-based.

Under the old tax regime, the lease rental restriction meant that the benefits of leasing cars reduced the more expensive the vehicle. The new regime will make leasing cheaper on low-emitting vehicles, but those emitting 161 g/km or more will often become more expensive regardless of the funding method because you’ll pay more tax in the early years.

However, vehicles with emissions over 161g/km CO2 which cost in excess of £20,000 will generally have a lower after-tax cost when compared to the previous rules. This is because the level of costs disallowable under tax has changed from a sliding scale to a flat rate of 15%.

If you haven’t already done so, now is the time to review your business car strategy to ensure that you take advantage of the new tax regime and to make sure you continue to run your fleet in the most cost efficient way. Many customers have been preparing for this change for months, but we’re aware that many haven’t. This will have such an impact on vehicle taxation that it’s important that our customers understand how this will affect them and are prepared for the changes it will bring.

We recommend that you pay particular attention to cars costing more than £12,000 - termed as ‘expensive cars’ under previous tax rules - to see whether the costs of these would become more or less favourable under the new regime.

For further advice or to find out how Dynamic Vehicle Solutions can help you understand these changes visit them at www.dynamicvehiclesolutions.co.uk or call them on 0845 40 80 321