Where an employer provides a higher paid employee, or a director with a company car, a taxable benefit arises. The amount of the benefit is determined by the cost, CO2 emissions and power supply. The benefit is reduced when a vehicle is not made available for part of the tax year. Pooled cars can be provided tax-free while the charge on low emission vehicles can be very low.A further benefit arises if fuel is supplied for private use. It is unlikely to be tax efficient to supply private fuel.
Car benefit is calculated as a percentage of the manufacturer’s list price of the car plus accessories, based on the carbon dioxide (CO2) emissions of the car as follows:
• Take the list price of the car.
• Add the price of any accessories
Deduct any capital contributions made by the employee toward the cost of the car or accessories. This is the “interim sum”.
• Multiply the interim sum by theappropriate percentage (this is worked out according to the car’s CO2 emissions with adjustments for fuel type).
• Reduce for periods when the car is unavailable or shared
• Deduct payments made* by the employee for private use of the car.
• If the car is a classic car with a market value of more than £15,000 the rules are changed.
• There are special rules for cars that have very low emissions/run on dual/alternative fuels.
• The appropriate percentage changes each year.
• The employer pays Class 1A NICs too, but this along with all the running costs and capital allowances, are tax deductible.
The Revenue’s company car and fuel benefit calculator can be accessed here.