For those purchasing cars outright/Hire Purchase/Lease Purchase/Contract Purchase:
|Current CO2 Band||Current Allowance %||From April 2018||% From April 2018|
|0-75 g/km||100% pa||0-50 g/km||85%|
|76 -130 g/km||18% pa||51-110 g/km||18%|
|131 g/km and above||8% pa||111 g/km and above||8%|
So if you are going to buy do it before April!
For those leasing cars the allowable % of rentals have also changed.
|Current CO2||Current % of rental**||From April 2018||% From April 2018|
|0-130 g/km||100%||0-110 g/km||100%|
|131 g/km and above||85%||111 g/km and above||85%|
**Paid in financial year
Superficially this does not appear much, however when you run the numbers the difference is tangible. Our example below assumes a Vauxhall Insignia 1.6D which emits 114 g/km CO2 and has a non-maintained monthly rental of £300 per month including non-recoverable VAT.
|Pre April 2018||Post April 2018|
|Rentals paid in financial year £300 x 12||£3600||£3600|
|Corporation Tax rate||19%||19%|
|Net of tax cost||£2916||£3018.60|
|Increased cost||+£102.60 pa|
|Effective Monthly increase||+£8.55 pm|
This will be further exacerbated with:
- The introduction of WLTP, real life emission testing, which is expected to take a raft of vehicles over 110 g/km and therefore out of the of the 100% allowance zone.
- Altering OpRA (Operational Remuneration Payments) affecting those taking a cash allowance rather than company car for those having a flexible benefits package.
So what action should you take:
- For clients with pick lists we must point this out and probably adjust pick lists to sub 110 g/km CO2 accordingly.
- If you take out a lease and want maximum tax shelter, start the lease before the end of the March 2018 and put down as large an initial rental as possible which will be 100% allowable on cars up to 130 g/km CO2.
If this all seems rather complicated, please contact CBVC and we will help you through the increasingly convoluted tax changes.