A green company car scheme offering vehicles with CO2 emissions of 120g/km or less for all its employees has been launched by Deloitte.

The initiative will help reduce costs for participating staff as well as reduce carbon emissions, explained the business advisory firm.

“The new company car tax rules coming into force from April 2009 change the tax relief available for businesses and are based on CO2 emissions,” said Mike Moore, a director in the employment taxes group at Deloitte.

“At Deloitte, we decided to take a more innovative approach by widening out the availability of company cars to all 12,000 employees nationwide.”

Under the new scheme, there are three areas where savings can be made, explained Deloitte.

Tax savings can be made by sacrificing salary in return for a benefit-in-kind.

For example, a basic rate tax payer could give up salary taxed at 31% - income tax and National Insurance Contributions - and take a petrol car with emissions below 120g/km and pay tax on 10% of the list price.

In addition to taking advantage of volume discounts, businesses will have the ability to recover VAT and save on National Insurance and vehicles with lower CO2 emissions generally use less fuel.

The scheme provides a car for business and personal use, which includes in the monthly cost fully comprehensive motor insurance, roadside assistance, maintenance and servicing, and road fund licence.

From April 1, the existing £12,000 Expensive Car Leasing Disallowance (ECLD) threshold will be scrapped and replaced with a new leasing disallowance based on CO2 emissions.

Cars with CO2 emissions above 160g/km will receive a 10% writing down allowance, while those at or below 160g/km will attract a 20% allowance.

Thus enabling businesses buying a vehicle emitting 160g/km or below outright will be able to offset twice as much of the cost of its depreciation against their corporation tax bill.

In addition, until 2013, firms buying vehicles that produce less than 110g/km of CO2 will be able write off the full cost of these cars in the first year.