Company car CO2 taxation
A NEW lower level of emissions for the minimum company car tax charge in 2005/06 has been announced. The level of CO2 emissions qualifying for the minimum charge in 2005/06 will be reduced by 5g/km CO2, at 140g/km CO2. There was no indication given for the level beyond this tax year.
The levels of CO2 emissions qualifying for the minimum charge up to 2004/05 were announced in the 2000 Budget and have been reduced by 10grams CO2/km each year.
Fuel scale benefit charges confirmed
AS announced by the Chancellor in 2002, a new fuel benefit charge comes into effect this tax year, which replaces the present fuel scale charge and applies where an employee who has a company car is provided with free fuel for private use, the same circumstances as the present fuel scale charge.
The change is in how the benefit is measured. It will, like the new company car benefit charge, be linked directly to the CO2 emissions of the company car. The same percentage figure will be used for both purposes.
Like car benefit, the fuel benefit charge will be based on the level of CO2 emissions of the car, with the same 3% supplement for diesels which do not meet Euro IV standards and reductions for alternatively fuelled cars. Also, like car benefit, the percentages for petrol and diesel range from a minimum of 15 to a maximum of 35% and the percentage for alternative fuels and hybrid cars can be below 15% with reductions.
To calculate the benefit charge on free fuel the percentage figure will be multiplied against a set figure for the year. For the year 2003/04 the set figure will be £14,400.
For example: a car that has CO2 emissions of 195g/km
Percentage used to calculate the company car tax charge for 2003/04 is 23%. The fuel scale charge will be 14,400 x 23% = £3,312.
Where free fuel ceases to be provided to an employee during the tax year, they will be entitled to pay only the proportion of the full annual tax charge related to the part of the year until free fuel stopped. The amount of Class 1A NICs due will be proportionally reduced to the same extent. However, receiving free fuel again later in the same tax year will prevent any apportionment for this reason.
For cars registered before January 1, 1998 and cars with no approved CO2 emissions figure, the percentage figure to be used is the same figure used to calculate company car benefit.
Vehicle Excise Duty (VED)
FOLLOWING the introduction of graduated VED for cars, today's budget sees the introduction a new rate of VED to provide an incentive for the use of cleaner cars.
The most environmentally friendly cars - with carbon dioxide emissions below 100g/km - will now pay as little as £55 per annum and be put in a new 'AAA' band.
The most polluting vehicles -those that produce CO2 emissions of 186g/km or more - will now pay up to £165.
VED rates are increased by £5 for cars and vans. VED for lorries and motorcycles will be frozen.
VED for LPG-powered cars and vans, registered before March 1, 2001 will be for vehicles of 1,549cc and below, £110 per annum and for above 1,549cc, £165 pa from May 1, 2003.
|Graduated VED rates for vehicles registered on or after March 1, 2001|
|VED band||CO2 emissions (g/km)||Cars using alternative fuels (£pa)||Petrol car||Diesel car|
|AAA:||Up to and including 100||55||65||75|
|AA:||101 to 120||65||75||85|
|A||121 to 150||95||105||115|
|B:||151 to 165||115||125||135|
|C:||166 to 185||135||145||155|
|D:||186 and above||155||160||165|
DUE to the recent high and volatile oil prices, as a result of military conflict in Iraq, the Chancellor announced that the Government is deferring the annual rise in road fuel duties until October 1, 2003.
From September 1, 2004, the Government will introduce a new rate of duty for sulphur-free petrol and diesel, set at 0.5 pence per litre relative to the rate for ultra-low sulphur fuels. This is meant to encourage the early introduction and take up of these fuels.
Further details will be announced later.
From January 1, 2005, the Government will introduce a new rate of duty for bioethanol, set at 20 pence per litre below the rate for sulphur-free petrol. The Government intends to consult on ways to ensure that fiscal incentives and other policy measures for road fuel gas 'continue to reflect the Government's environmental and other policy objectives', with a view to announcing decisions on future means of Government support this year.
|Changes to fuel duty|
|Fuel type||Previous duty||Duty from Budget day||Duty from October 1, 2003||Change|
|ULSP/D||45.82p per litre||45.82p||47.10p||+1.28p|
|Road fuel gases||9p per kilogram||9p||9p||Nil|
|Biodiesel||25.82p per litre||25.82p||27.10p||+1.28|
Employer provided vans
THE Government has reasserted its plans to consult on proposals to reform the tax treatment of fleet commercial vehicles, taking into account 'environmental benefits, fairness and modern working practises'.
The Government says it will consult on the tax treatment of company vans 'shortly after the Budget'.
Those likely to be affected are: employees provided with a van that is available for their private use and employers who bear Class 1A National Insurance on the taxable benefit of a provided van.
Initiatives for those cycling to work
LEGISLATION limiting the number of times an employer can provide an employee who cycles to work with meals or refreshments as a benefit-in-kind to six times a year is to be abolished.
The criteria setting out when these meals or refreshments can be provided tax free remains unchanged ie they have to be provided as part of official cycle to work days.
D-Day for fleet tax timebombs
A SERIES of 'timebomb taxes' announced last year came into force this week, pushing up the cost of running Britain's fleets by tens of millions of pounds.
The increases are separate from any tax hikes introduced in today's Budget. Chancellor Gordon Brown announced the rises last year, but delayed their introduction until Sunday, the beginning of the tax year. The Government has now introduced a £4 billion hike in National Insurance Contributions (NIC), to fund improvements to the NHS, with estimates suggesting the extra cost to fleets could range between £50 million and £100 million.
The increase in NIC hits both employers and employees from this week and could force companies to rethink their fleet policies to cope with the changes.
The biggest impact on fleets comes from a one percentage point increase to 12.8% from 11.8% in employer's NIC due on staff wages and benefits. This equates to an 8.5% increase in employer NICs if the employee's tax bill does not increase.
However, because carbon dioxide-based company car tax also rose for many drivers from April 6, this increases the inflationary effect of the NIC increases. The percentage charge increase for Class 1A NIC from 11.8% to 12.8% means the employer pays £394 on the benefit, up from £328 for the 2002/2003 tax year, equivalent to a 20% tax rise.
There are 1.68 million drivers currently paying tax on the benefit of receiving a company car and 850,000 paying tax on the benefit of free fuel for private mileage, which is also now taxed under a CO2-based system.
The combined effect of NIC increases on the two benefits is to push up company cost by tens or even hundreds of thousands of pounds, depending on fleet size.
|How the tax increase works|
|Company car list price:||£14,644|
|CO2 emissions (g/km):||185|
|Car benefit % of list price:||19%||21%|
|Income tax (higher rate):||£1,113||£1,230|
|Employers national insurance rate:||11.8%||12.8%|
|Employers national insurance cost:||£328||£394|
|Employer's cost increase from 2002/2003:||-||20%|
How will the Budget affect you? Let Fleet News gives you the answer
##BB03--right## FLEET News is hosting a Budget Briefing to look in detail at the Chancellor of the Exchequer's announcements today and help fleets examine how they will be affected.
The event will be held at the Heritage Motor Centre, Gaydon, Warwickshire, on Tuesday, April 15.
Presentations at the event, sponsored by Arval PHH and AllStar, will include a detailed explanation of the impact of many of the announcements, an action plan for fleet decision-makers and a look at some of the legal issues facing modern fleets and their drivers.
Alternatively email email@example.com or call 01733 468123.
ARVAL PHH - Europe's leading fleet, fuel and accident management service provider for more than 25 years.