Green company car – is there such a thing?
I was speaking to a client yesterday regarding the options of having a company car and coming from a carbon reduction background he was keen to have a low emission car and wanted to know the tax effect. This is an area where the government are encouraging growth using the taxation system as a carrot, to encourage lower emissions, the arguments regarding the costs and environmental impact of battery materials and technology we will leave to other forums.
He was looking at the Honda Insight with a P11D list price of £16,270 and CO2 of 101g/km. The other well known hybrid the Toyota Prius has lower emissions of 89g, but higher list of £19505.
Benefits in kind
The car benefit to the employee is based on 10% of the list price (£1627 for the Honda) and is £325.40 for a basic rate taxpayers and £650.80 for a 40% rate taxpayer. The additional benefit if fuel is provided is £1800, costing an additional £360 or £720 in tax for 20%/40% taxpayers respectively.
The equivalent for a 2.0 TDCi Mondeo Zetec list price £16770 and 139g CO2, benefit is £3186 and cost £637.20 and £1274.40 for 20%/40% taxpayers, and with fuel an additional £3420 benefit costing £684 and £1368 respectively.
In conclusion the Mondeo works out at about twice as much due to higher emissions for a similar priced car.
Capital allowances
There are also savings for a company, if a car has emissions of less than 110g then the full cost of the vehicle can be claimed against profits in the year of purchase so at 21% a saving of £3416 in corporation tax. The Mondeo with emissions of <160g attracts a 20% allowance, and only £670.80 tax saving
There is a price to pay in terms of performance and size but clearly significant savings in tax in the year of purchase, but well worth considering for the green driver.
I hope this will help you decidwhat would be the best option for you but if you are unsure about this or would like advice in other areas feel free to call. Alastair Wood, AW Accounting – Accountants who “speak your language”
