Last week we turned
our attention to employee benefits, in particular company cars and meals
taken while away from the normal workplace. The rules and rates for
taxation of both these benefits are changing from 6 April 2016, so you
need to inform your clients. We also shared news on the provision of tax
calculation statements by HMRC for mortgage purposes.

This is an
extract from our topical tax tips newsletter dated 10 December 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Company cars and fuel


As we predicted in
our newsletter on 12 November 2015 the 3% supplement for diesel powered
company cars is to be retained after 5 April 2016. As a result the
taxable benefit for using a diesel company car will increase in 2016/17
rather than decrease as had been expected.


 


This announcement
was made in the Autumn Statement on 25 November 2015, which will have
been too late for many tax rates and tables books published this year.
HMRC’s online calculator for car and fuel benefit currently doesn’t
cover 2016/17, but that may updated in January 2016.   


The percentage of
list price used to calculate the taxable benefit for all company cars
will increase by two percentage points from 2015/16 to 2016/17. This
includes cars with CO2 emissions under 51g/km, which will be taxed at 7%
of the list price, or 10% for a diesel car.


 


The maximum
percentage of list price used for the benefit calculation is now set at
37%. That level will be achieved by diesel cars with CO2 emissions of
185g/km or more in 2016/17. Petrol cars will achieve the maximum at CO2
emissions of 200g/km or more.


 


As around 81% of
company cars are diesel powered, you need to inform your clients of this
change so they are prepared for higher tax and class 1A NIC liabilities
in 2016/17. Look out for notices of coding for 2016/17 and check that
the correct taxable benefit for the company car has been included.


 


If a taxpayer has a
company car in most cases it is not economical to take free fuel for
private use, as the fuel used will cost less than the tax payable on the
fuel benefit. Instead of free fuel the taxpayer should claim the cost
of fuel used on business journeys, from his employer, using the advisory
fuel rates. Those advisory rates have been revised with effect from 1
December 2015, mostly downwards, but the old rates can be used for
journeys taken before 1 January 2016.

This is an
extract from our topical tax tips newsletter dated
10 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>