Company car tax expert at Mazars Alastair Kendrick gives his expert opinion on the PBR.

 

"In his recent statement the Chancellor confirmed the future for the taxation of company cars.

The present tax rules had been in place for 10 years at April 2012 and it was unclear what would be the future policy.

The statement confirms that there is no intention to significantly change the way in which the benefit in kind is calculated however, the changes announced will mean that company cars will be more expensive for employees unless the vehicles they take have lower CO2 emissions

The change also means that the current rates are significantly adjusted from April 2012 and that the 10% band will apply to company cars with CO2 emissions up to 99g/km (against 120g/km at present). It is intended that all CO2 emissions thresholds will be moved down by 5g/km.

This change is no surprise and there had been suggestions that the 10% rate band may have been moved even greater.

The 10% band was meant to entice manufacturers to produce lower CO2 emission vehicles and it we have found that a significant number of cars are now available which fall within this category.

It will be interesting to see if the announcement in the Pre-Budget Report will further encourage the manufacturers to find more engine efficiencies.

We have seen with the development of a significant number of low CO2 emission cars a push by the leasing industry of salary sacrifice arrangements and we wait to see what impact the announcement by the Chancellor will have on these.

It is very likely that these will be less attractive and that employees will find that the savings they could have obtained historically will reduce or even disappear.

It will be interesting to see what employers will do for those employees who have committed to these schemes and have arrangements which will continue after the change in the taxable benefit calculation. It is possible employees will be found to be out of pocket.

The Chancellor also announced a significant tax break for those who take a electric company car.

The announcement is that employees will not have a benefit in kind for five years.

It was reported in the press recently that out of a population of around one million company cars there are only 50 electric cars.

The question is whether this change will encourage more in to electric vehicles.

The issue is that there are still significant concerns over whether the Government is really committed to this form of power for cars in the long term and how the leasing concerns will price for them.

Unless there is confidence within the leasing industry over the future residual value of these cars they may (even with no benefit in kind) still work out more expensive than a traditionally powered car

The tax break also extends to electric vans with no benefit in kind on these also and the owner of the van being able to claim 100% capital allowances on these

The changes announced on fuel for those receiving private fuel for vans and cars is in line with expectation but these changes are introduced from April 2010.

Clearly the announcement on cars and fuel will really get employers to again look at their car policy and decide whether they should be restricting the type of cars they provide to employees or indeed to be buying some employees out of this benefit.

It also begs the question whether there are employees provided with free private fuel when this is no longer viable."