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Sneaky Chancellor piles on the pain!

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By stealth I am afraid the government have effectively increased the Corporation Tax burden on company cars, even on what they class as Ultra Low Emission Vehicles (ULEV cars emitting 75 g/km CO2 and below).

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

Allowable %

100%

85%

Corporation Tax rate

19%

19%

Tax relief

£684

£581.40

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.

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