Guide to Company Car Tax

Size: px

Start display at page:

Download "Guide to Company Car Tax"

William Hampton
5 years ago
Views:

Guide to Company Car Tax October 2018 The information provided in this Guide is for general information purposes only and is correct to the best of our knowledge at the time of publication (October

While we have made every effort to ensure the information in this document is accurate, Fiat Chrysler Automobiles NV group of companies, its affiliates, servants and/or agencies are not liable or

1 Guide to Company Car Tax October 2018 The information provided in this Guide is for general information purposes only and is correct to the best of our knowledge at the time of publication (October 2018). While we have made every effort to ensure the information in this document is accurate, Fiat Chrysler Automobiles NV group of companies, its affiliates, servants and/or agencies are not liable or responsible for any claims, actions, losses (direct and indirect) or consequences arising from acting on, or refraining from taking or failure to take any action, as a result of reading this Guide. You should seek your own independent financial and legal advice in relation to any taxation or accounting matters referred to in this document. The values for fuel consumption and CO 2 emissions are provided in accordance with EU Directives and Regulations. CO 2 and fuel consumption values for EU6D models have been determined by the NEDC cycle as per Regulation (EU) 2017/1153 for comparative purposes and may not reflect the actual values of CO 2 and fuel consumption. Factors such as driving style, additional vehicle accessories and personalisation, weather and road conditions may have a significant effect on fuel consumption and CO 2 values. This may also lead to a change to the VED payable. More information is available at

OCTOBER BUDGET 2018: The main points The announcement of a consultation on the impact of WLTP on BIK tax and Vehicle Excise Duty, nominal rises in Vehicle Excise Duty, plans for a new consultation on

It also confirmed the significant changes to the Plug-in Car Grant for Ultra Low Emitting Vehicles (ULEVs), announced earlier in October.

This FCA Guide to Company Car Tax 2018/19 examines the main points of the October 2018 Budget for fleet operators and company car drivers.

2 OCTOBER BUDGET 2018: The main points The announcement of a consultation on the impact of WLTP on BIK tax and Vehicle Excise Duty, nominal rises in Vehicle Excise Duty, plans for a new consultation on environmmental incentives for van drivers and confirmation of the freeze on road fuel duty were key Budget announcements on October 29. It also confirmed the significant changes to the Plug-in Car Grant for Ultra Low Emitting Vehicles (ULEVs), announced earlier in October. It meant the Chancellor presented little clarity on the future of company car taxation, with no information released on tax rates beyond 2021/22 leaving fleet decision makers unable to plan ahead. This FCA Guide to Company Car Tax 2018/19 examines the main points of the October 2018 Budget for fleet operators and company car drivers. / COMPANY CAR TAX BANDS No information was provided on the future of the company car taxation system beyond 2020/21. The Government is deferring any announcements until after a consultative review of the impact of the Worldwide harmonised Light-vehicles Test Procedure (WLTP) on the company car tax and Vehicle Excise Duty (VED) systems concludes next Spring. In the meantime, company car BIK tax rates are set to rise from April , with the lowest percentage increasing from 13% to 16%. For diesels, the lowest rate will rise to 20%. / VEHICLE EXCISE DUTY Retail Price Index-linked increases in company car VED will come into force from April , with rises for vans based on the Consumer Prices Index from the same date. / PLUG-IN CAR GRANT FUNDING Funding is now available only to cars with CO2 emissions of less than 50g/km and a zero-emissions range of over 70 miles. / ROAD FUEL DUTY FROZEN FOR NINTH YEAR The road fuel duty freeze for the ninth year in succession is good news for the fleet industry. Had the fuel duty escalator introduced by Government in 2011, continued as planned, a litre of unleaded today would be around 1.70 at the pumps. / PLANS FOR LCV ENVIRONMENTAL INCENTIVES Government is set to release a summary of responses from a consultation, published in May 2018, on reforming VED to incentivise light commercial vehicle drivers to make the cleanest choices when purchasing a new vehicle. The response will set out, ahead of Finance Bill , proposals to introduce environmental incentives for vans and LCVs from April / CHARGE POINT CAPITAL ALLOWANCES EXTENDED The end-date for Enhanced Capital Allowances (ECAs) for companies investing in electric vehicle charge points is extended until March

3 VEHICLE EXCISE DUTY (VED) New car Vehicle Excise Duty (VED) rates are shown in the table, (below). Diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard are liable for increased first-year (or showroom tax ) rates. For cars already registered at March , VED rates are subject to a Retail Price Index-based rise from April as shown in the table (right). VEHICLE EXCISE DUTY: NEW CARS / FIRST YEAR RATE Applicable to all new cars in year one, with higher rates for diesels / STANDARD RATE (YR2 ONWARDS) 145 cars with CO 2 emissions of 1g/km or over with a list price of 40,000 or less / ADDITIONAL RATE (YR2 ONWARDS) 465 cars with CO 2 emissions of 1g/km or over with a list price over 40,000 CO 2 First year rate First year rate Standard rate Standard rate emissions (compared for diesel cars (Yr2 on for cars with list (Yr2 on for cars with list (g/km) with 2018/19) (compared with 2018/19) 1 price of 40,000 or less) price of over 40,000) (+ 0) 0 (+ 0) (+ 0) 25 (+ 0) (+ 0) 110 (+ 5) (+ 5) 130 (+ 5) (+ 5) 150 (+ 5) (+ 5) 170 (+ 5) (+ 5) 210 (+ 5) (+ 5) 530 (+ 15) (+ 15) 855 (+ 25) (+ 25) 1,280 (+ 40) ,280 (+ 40) 1,815 (+ 55) ,815 (+ 55) 2,135 (+ 55) Over 255 2,135 (+ 65) 2,135 (+ 65) Applies to diesel vehicles that do not meet the Real Driving Emissions Step 2 (RDE2) standard. Alternative fuel vehicles receive a 10 annual reduction. 2 All cars with a list price over 40,000 are attract a 320 supplement for five years following the first year rate, after which the rate reverts to the standard 145 a year. For cars with zero emissions the rate reverts to 0 after five years. 2019/20 rates apply from April VEHICLE EXCISE DUTY: CARS REGISTERED ON OR AFTER MARCH VED CO 2 emissions 2019/20 standard rate band (g/km) (increment over 2018/19) A Up to (+ 0) B (+ 0) C (+ 0) D (+ 5) E (+ 5) F (+ 5) G (+ 5) H (+ 5) I (+ 10) J (+ 10) K* (+ 10) L (+ 15) M Over (+ 15) Figures in brackets show comparison with 2018/19. * Includes cars emitting over 225g/km registered before March /20 rates apply from April

4 COMPANY CAR TAX (CCT) Company car BIK tax is based on a car s emissions of CO 2, with the taxable percentages of P11D price applying for 2018/19 to 2019/20 shown in the table (right). For diesels that do not meet Real Driving Emissions Step 2 (RDE2) standards, a 4% tax charge applies. Currently there are no RDE2-compliant vehicles available. In 2020/21, a new scale with rates ranging from 2% to 14% applying to cars with CO 2 emissions of 0-50g/km, applies based on the number of zero emission miles they can cover. Company car tax calculators are available for Fiat, Alfa Romeo and Jeep using the following web addresses: CO 2 emissions information is available for all FCA Group models by visiting the Vehicle Certification Agency website at EXAMPLE: BIK TAX LIABILITY IN 2018/19 A Jeep Compass Limited 1.6 MultiJet II 120hp has a P11D price of 29,140 (October 2018) and CO 2 emissions of 117g/km, putting it in the 24% BIK band. 29,140 x 24% gives a taxable value of 6,994, equating to yearly BIK tax of 1,399 ( 117/month) for a 20% tax payer, or 2,797 a year ( 233/month) at 40%. TAXABLE PERCENTAGES OF P11D VALUE AND CAPITAL ALLOWANCE RATES 2018/19 to 2019/ /21 CO2 BIK % Capital BIK % CO 2 Zero BIK % emissions 2018/19 allowance % 2019/20 emissions emissions 2020/21 (g/km) 2018/19 (g/km) range (17) (20) 0 All 2 (6) 1-50 Over (6) (9) (12) (16) 1-50 Up to (18) (20) (23) (19) (23) (26) (20) (24) (27) (21) (25) (28) (22) (26) (29) (23) (27) 18/ (30) (24) (28) 8 27 (31) (25) (29) 8 28 (32) (26) (30) 8 29 (33) (27) (31) 8 30 (34) (28) (32) 8 31 (35) (29) (33) 8 32 (36) (30) (34) 8 33 (37) (31) (35) 8 34 (37) (32) (36) 8 35 (37) (33) (37) 8 36 (37) (34) (37) 8 37 (37) (35) (37) 8 37 (37) (36) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) (37) 8 37 (37) (37) Figures in brackets apply to diesels. Diesel hybrids and diesel cars that meet the Real Driving Emissions Step 2 (RDE2) standard are exempt from the diesel tax charge. 1 18% capital allowance applies to vehicles with CO2 emissions of 110g/km or less and 8% applies to vehicles with CO2 emissions of 111g/km or more. On April , the 8% capital allowance reduces to 6%. 2 Measured in miles. Rates applicable from April 6 in each year.

5 CAPITAL ALLOWANCES Company cars bought outright are eligible for write-down allowances, where the capital outlay can be offset against tax. The allowance threshold between the 18% main rate and the 8% special rate is based on CO 2 emissions, set at 110g/km in 2018/19. For cars with CO 2 emissions of g/km inclusive, the allowance is 18% a year. For cars with CO 2 emissions of 111g/km or more, the special rate allowance is 8% a year. On April , the special rate allowance reduces to 6%. 100% FIRST YEAR ALLOWANCE A 100% first-year capital allowance (FYA) applies to cars with ultra-low CO 2 emissions, with the threshold set at 50g/km applicable until March Leasing companies are excluded from claiming the first-year allowance. Budget 2018 saw the Chancellor announce an extension to the cut-off date for Enhanced Capital Allowances (ECAs) for companies investing in electric vehicle charge points to March LEASE RENTAL RESTRICTION The amounts payable on lease rentals are normally an allowable expense for businesses that can be offset against tax, with the threshold set at 110g/km. New cars with CO 2 emissions of 110g/km or less are eligible for 100% of their lease payments to be offset against corporation tax. For those with CO 2 emissions of 111g/km or more, only 85% is claimable.

CLASS 1A NATIONAL INSURANCE CONTRIBUTIONS: CARS The percentage used for the calculation of employers Class 1A National Insurance Contributions (NIC) on company cars and fuel is set at 13.

6 CLASS 1A NATIONAL INSURANCE CONTRIBUTIONS: CARS The percentage used for the calculation of employers Class 1A National Insurance Contributions (NIC) on company cars and fuel is set at 13.8% in 2018/19. To calculate annual Class 1A NIC due, the car s P11D price is multiplied by the relevant BIK tax percentage and then by 13.8%. For fuel, the Government Fuel Benefit Charge (FBC) is used 23,400 in The FBC rises in line with RPI on April CALCULATING CLASS 1A NIC CARS A Jeep Compass Limited 1.6 MultiJet II 120hp with a P11D price of 29,140 (October 2018) and CO 2 emissions of 117g/km has a BIK tax percentage of 24%, attracting a tax charge of 24% of its P11D value in 2018/19. 29,140 multiplied by 24% gives a taxable value of 6,994. Multiplying by 13.8% derives the annual Class 1A NIC contribution due in 2018/ CALCULATING CLASS 1A NIC FREE FUEL Multiplying the fuel benefit charge (FBC) figure of 23,400 by the Jeep Compass Limited 1.6 MultiJet s 24% tax charge gives a taxable value of 5,616. Multiplying again by 13.8% derives the annual Class 1A NIC due 775. For further information on Class 1A NIC on car and fuel benefits, click HERE.

7 FUEL ALLOWANCES THE FREE FUEL BENEFIT BIK tax is payable by drivers receiving employer-provided free fuel for private mileage in a company car. To calculate the tax due on employer-provided free fuel, the Government Fuel Benefit Charge (FBC) is used. For 2018/19, the FBC is set at 23,400, and rises in line with RPI on April BUSINESS MILEAGE, PRIVATE CAR The HMRC mileage allowance payments (MAPs) for business mileage reimbursement in a private car are shown below for 2018/19. The rates are the tax and NIC-free amounts claimable per mile by a driver using his/her own car on business. MILEAGE ALLOWANCE PAYMENT (MAP) RATES 2018/19 Up to 10,000 miles Over 10,000 miles All cars 45p 25p EXAMPLE: CALCULATING TAX DUE ON FREE FUEL A Jeep Compass Limited 1.6 MultiJet II 120hp has CO 2 emissions of 117g/km giving a BIK tax percentage of 24% in 2018/19. / Its combined fuel consumption is 64.2mpg. 23,400 x 24% gives a taxable value of 5,616 in 2018/19. / Multiplying by the driver s marginal tax rate (20% or 40% in 2018/19) derives annual tax due of 5,616 x 20% = 1,123, or 5,616 x 40% = 2,247. / With the average price of unleaded at 5.97/gal or 1.31/litre (October 2018), 1,123 will buy 188 gallons (855 litres) for a 20% tax payer; for a 40% tax payer, it is 376 gallons (1,709 litres). / Multiplying by the combined fuel consumption of 64.2mpg gives 12,069 miles for a 20% tax payer, or 24,139 miles for a 40% tax payer the minimum private mileages you need to cover to make the free fuel benefit worthwhile. / If you drive fewer private miles than the calculated figures you will be better off paying for private fuel yourself as it will cost less than the tax you pay. On the other hand, if you drive more private miles, you are better off paying the tax.

8 GOVERNMENT ULEV GRANTS The Government Plug-in Car Grant (PiCG) for ultra-low emissions vehicles (ULEV electric or part-electric cars that emit 75g/km of CO 2 or less) is available only to cars with CO 2 emissions of less than 50g/km and a zero-emission range of over 70 miles. The grant rate is 3,500 per car, reduced from the previous 4,500 which applied to Category 1 vehicles. Previous Category 2/3 vehicles are now ineligible for the grant. All ULEVs remain eligible for the Electric Vehicle Homecharge Scheme (EVHS) grant, even if they no longer qualify to receive the PiCG. The EVHS covers up to 75% of the cost of installing a charge point at home, capped at 500 inc VAT. Enhanced Capital Allowances (ECAs) are also available for companies investing in electric vehicle charge points, with the allowance extended until March ULEV GRANT CATEGORIES 2018/19 / PICG ELIGIBLE CARS: Cars with CO 2 emissions of less than 50g/km and a zeroemission range of over 70 miles benefit from a grant of 3,500. / MOTORCYCLES: Motorcycles with CO 2 emissions of 0g/km and a zeroemission range of at least 31 miles benefit from a grant of 1,500. / MOPEDS: Mopeds or scooters with CO 2 emissions of 0g/km and a zero-emission range of at least 19 miles benefit from a grant of 1,500. / VANS: Vans with CO 2 emissions of under 75g/km and a zeroemission range of at least 10 miles benefit from a grant of 8,000. Go to for further information. Visit for a list of granteligible vehicles.

LIGHT COMMERCIAL VEHICLES COMPANY OWNED LCVS: BIK TAX The Van Benefit Charge (VBC) rate for drivers of company vans, including doublecab pick-ups, who use their vehicles for private mileage is set at

9 LIGHT COMMERCIAL VEHICLES COMPANY OWNED LCVS: BIK TAX The Van Benefit Charge (VBC) rate for drivers of company vans, including doublecab pick-ups, who use their vehicles for private mileage is set at 3,350 in 2018/19, and rises in line with the Consumer Prices Index (CPI) on April The figures are compared in the comparison table below / ANNUAL BIK TAX ON COMPANY-OWNED LCVS WITH PRIVATE USE EXAMPLE: FIAT TALENTO SWB 10 MULTIJET 95HP 2018/19 Annual BIK tax (ex fuel) 670/ 1,340 Annual BIK tax (inc fuel) 797/ 1,593 Figures shown for 20%/40% tax payers Employees using their vans to drive from home to customers, and who are not allowed other private use, do not pay BIK tax. In 2018/19 the Van Benefit Charge rate paid on electric vans is 80% of the rate paid on conventionally fuelled vans, followed by 90% in 2019/20, with the rates equalised in COMPANY OWNED LCVS: CLASS 1A NIC Annual Class 1A National Insurance Contributions for vans, including double-cab pick-ups, are based on the Van Benefit Charge. The amounts are calculated by multiplying the VBC by 13.8%. / ANNUAL CLASS 1A NIC FOR LCVS EXAMPLE: FIAT DOBLÒ CARGO V 2018/19 Annual Class 1A NIC (ex fuel) 462 Annual Class 1A NIC (inc fuel) 550 COMPANY OWNED LCVS: VED The Government will respond to a consultation on VED reform for vans, published in May 2018 and will set out, ahead of Finance Bill , proposals for environmental incentives from April / ANNUAL VEHICLE EXCISE DUTY FOR LCVS VED RATES 2018/19 AND 2019/ / /20 Euro IV and Euro V vans registered on or after March All other vans registered on or after March /20 rates apply from April

TAX GUIDE 2018/19 1 ABOUT US 2 COMPANY CAR TAXATION 3 CAR BENEFIT CHARGE 4 OPTIONAL REMUNERATION ARRANGEMENTS (OPRA) 5 COMPANY VAN TAXATION

TAX GUIDE 2018/19 1 ABOUT US 2 COMPANY CAR TAXATION 3 CAR BENEFIT CHARGE 4 OPTIONAL REMUNERATION ARRANGEMENTS (OPRA) 5 COMPANY VAN TAXATION TAX GUIDE 2018/19 13 A summary of the key taxation facts 13 ABOUT US The Chancellor delivered the Autumn Budget Statement on 29 October 2018. The Lex Autolease Fleet Consultancy Team has analysed its contents