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.
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
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