Fleet News

Newer car, less BIK tax

HUMAN resource departments face the unenviable task of explaining to staff why company car drivers with the newest cars are in many instances paying lower benefit-in-kind tax bills. A spate of cuts in official car list prices has left some company car drivers high and dry, depending upon when they took delivery of their new car.

Employees who picked up a new Ford Mondeo 1.6i LX on July 1, for example, would pay tax based on the official list price of £15,580. If they collected the car on July 5, their company car tax charge would be based on an official list price of £14,400. This means that the delay of a week has saved drivers up to £203 a year in tax, based on a 40% taxpayer covering fewer than 2,500 business miles a year. In the middle category of drivers covering between 2,500 and 18,000 business miles, the cheaper car will cut a lower rate taxpayer's BIK bill by £83.38 a year.

But the Mondeo is not an isolated incident. In April, for example, Peugeot launched the facelifted 406 and cut up to £620 from official list prices. This means a higher rate tax payer who chose a 406 Executive 2.0 automatic would pay £87 less per year if he took delivery at the end of April, rather than with the new registration plate on March 1.

Historically, list prices have always risen, so drivers with newer cars have paid more tax than those with older vehicles. List prices are under severe deflationary pressure, which offers little solace to those with older, more expensive models who have no chance to appeal against higher tax bills. Alastair Kendrick, a director at Ernst & Young, said: 'I do not think there would be any basis for a challenge.'

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