Company cars and fuel, Tax free meals, Income verification

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>>>


Company cars, Business rates, More problems with HICBC

How can you add value to the service you provide to clients – to go beyond the expected norms of filing every tax return on time? One way is to anticipate future tax charges and help your clients make the changes necessary to minimise those taxes. Two areas in which you can help are; the provision of company cars, and business rates, as we discuss below. We also have news of more problems concerning child benefit claw-back.
 
Company cars
How many of your clients still have a company car? Do they understand how much it costs them and their company in tax and NI charges? Perhaps you need to have that conversation again in light of the proposed increases in tax charges in the years ahead.
From 6 April 2015 all company cars will generate a benefit in kind charge, even electric cars will be taxed on 5% of their list price. The taxable benefit for other low emission vehicles (51-75g/kg) will leap up from 5% to 9% of the vehicle’s list price. The taxable benefit for all other cars will also increase by two percentage points, even for high emission cars, as the maximum taxable benefit is increasing to 37% of the list price.  
In 2016/17 a similar hike in taxable benefit will be applied, as the appropriate percentage of list will increase by two percentage points for all cars, except for those which are already taxed at the maximum of 37%. These changes were introduced by FA 2014, s 24. 
However, company car drivers are set to get royally stuffed in 2017/18 and beyond in the proposals in the tax and impact note released on 10 December 2014 come to pass. In that year and in 2018/19 each 5g rise in CO2 emissions will mean a two percentage point increase in the taxable benefit. Thus the table of appropriate percentages of list price will go up in 2% steps not 1%, as has previously been the case. “Classic” cars with no recorded CO2 emissions will also be hit with increased taxable benefit charges. 
  
Say your client’s company has just provided him with a new Lexus NX 300 H Sport, list price: £40,000, CO2 emissions: 121g/kg. In 2014/15 he will be taxed on 17% x £40,000:  £6,800 (reduced by the proportion of the year when the car was not available). In 2015/16 he will be taxed on £7,600. In 2016/17 the taxable benefit increases to £8,400, but in 2017/18 the taxable benefit leaps up to £11,600 (29% of list price)! If he keeps the company car for more than 4.5 years he will be taxed on the full price of the car.

 

This is an
extract from our tax tips newsletter dated 12 February 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>