Fleet News

Confusion over BIK changes

OLDER technology diesel-engined cars could be the better buy for company car drivers thanks to the forthcoming benefit-in-kind tax changes, according to CAP.

The confusion surrounds the 3% benefit-in-kind tax surcharge on diesel cars. All diesel-engined cars registered after January 1, 2006, will incur the 3% surcharge for company car tax no matter if they are Euro III or Euro IV compliant.

Currently, Euro IV diesels escape the 3% surcharge and a Euro IV diesel car registered before January 1, 2006, will continue to escape the surcharge for the duration of its life as a company car.

Previous generation Euro III cars, which are being phased out by manufacturers, can still be sold until the end of 2006 if made before October this year.

Mark Norman, managing editor of CAP Monitor, said this meant there could be no advantage to buying a Euro IV car over a Euro III after the exemption is axed.

He said: ‘Euro III cars tend to be about £400 cheaper and are often more economical.

‘You could find that Euro III is potentially a better option.

‘Additionally, quite a few manufacturers are offering Euro III cars at sizeable discounts even though there may be no need for that.’

Euro IVs, despite having lower emissions overall, tend to have higher CO2 emissions than Euro III, meaning they could incur more tax.

Norman said: ‘If by choosing Euro III you can come down a band on taxation and you have got a lower list price, you should go for it.’

For example, a 22% taxpayer in a Ford Focus 2.0 TDCi Zetec three-door hatchback would be 53p a month better off by choosing the Euro III car, rather than the Euro IV version. However, by registering the Euro IV car before January 1, 2006, would see the same driver £8.35 a month better off than in the Euro III version.

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