Working out the tax on a company car
Some employers provide a company car that is also available for your private use (including travel between work and home). Since 6 April 2002, the way of taxing this benefit aims to cut polluting emissions and you will pay a lot of tax if you drive a gas-guzzler. Some employers offer employees cash instead of a car and require you to use your own car for business – but the structure of the mileage allowance aims to stop you or your employer profiting from this move.
If you only need a car for work occasionally, remember that a ‘pool car’ is tax-free. To qualify it must not normally be kept overnight near your home, it must be used by more than one employee, and any private use must be a consequence of business use.
Before you can work out which option is better for you, you need to be able to work out the taxable value of a company car and any free fuel you get.
Working out the tax on a company car
Here we explain how the rules work and the data you need, but rather than crunching the numbers yourself, you can use the calculator on the Revenue website.
The taxable value of your company car is usually its price when new multiplied by a percentage based on the carbon dioxide (CO2) emissions figure for your type of car. There are five steps to arrive at the taxable value:
- take the list price of your car when new
- find out the CO2 emissions figure for your car
- use Revenue tables to find out the percentage corresponding to that CO2 emissions figure
- increase or reduce the percentage by any supplement or discount (but only if the car was registered on or after 1 January 1998)
- multiply the list price by the percentage.
If you had the car for only part of the year, you can scale down the taxable value in proportion to the number of days in the tax year it was not available. And, you can deduct anything you pay yourself for use of the car.
The car’s list price when new
This is the list price of the car at registration (not the dealer’s price), including delivery charges, VAT and car tax. Any contribution you make towards the cost of the car is deducted from its price, up to a limit of £5,000, and the maximum price for tax purposes is currently capped at £80,000 (though this cap will be abolished from 2011–12). For cars without a list price, your employer will have to reach agreement with the Revenue, usually on the basis of published car price guides. The market value is used for classic cars worth at least £15,000 and aged 15 years or more at the end of the tax year.
You cannot create an artificially low price by getting a basic model and adding accessories. The price includes any accessories fitted before the car was made available to you, and any accessories or set of accessories worth more than £100 which are fitted after that. Accessories needed because you are disabled are excluded.
The CO² emissions figure
Cars registered in the UK from 1 March 2001 onwards have an official CO² emissions figure that is shown on the vehicle registration document. You can also get the figure for your car from the Vehicle Certification Agency website or a free booklet, Car Fuel Consumption & Emissions Figures. Contact: VCA (FCB requests), 1 The Eastgate Office Centre, Eastgate Road, Bristol BS5 6XX, Tel: 0117 951 5151 - www.vcacarfueldata.org.uk
Cars registered between 1 January 1998 and 28 February 2001 also usually have an emissions figure but this is not shown on the registration document. You can get the figure either free from the Society for Motor Manufacturers and Traders website or from the car manufacturer or importer (there may be a small charge).
Cars registered before 1998 – and a few other more recent but unusual models – do not have a CO2 emissions figure. Instead, the taxable value is the list price multiplied by a percentage based on the car’s engine size (Please see our separate article on CO2 related car benefit percentage charges for 2009-10 to 2011-12).
Fuel for company cars
If you get a company car, you may get free fuel for private use as well. The taxable value of fuel is a percentage of a set figure, which is £18,000 from 2010–11 onwards (£16,900 in 2009–10). The percentage is the same as that used to find the taxable value of the company car. Therefore in 2010–11, the taxable value of fuel will lie between 10% × £18,000 = £1,800 and 35% × £18,000 = £6,300. The fuel charge is proportionately reduced if you stop receiving free fuel for part of the tax year or your company car is not available for the full year. There is no fuel charge for a zero-emission company car.
You can avoid the fuel charge if you are required by your employer to reimburse the full cost of fuel used for private purposes and you actually do so. Bear in mind that commuting between home and work normally counts as private use. But fuel provided for travel between home and work for disabled employees is tax-free.
Taxable value of Vans
A van available for your private use was very lightly taxed compared with a company car, but this changed from 6 April 2007 onwards. From 2007–08 onwards, the yearly taxable value is £3,000 a year. The taxable value is reduced if:
- the van is unavailable for part of the tax year in line with the number of days it is unavailable
- the van is shared with other employees. The taxable value is split between the employees concerned on a just and reasonable basis
- you have to pay your employer for your private use. The amount you pay is deducted from the taxable value.
From 6 April 2010 to 5 April 2015, the taxable value of a zero-emission van is nil.
The taxable value of fuel provided by your employer for private use of the van is £550 in 2010–11 (£500 in 2009–10), reduced by any amount you have to pay. The taxable value of fuel for a zero-emission van is nil.
Since 6 April 2006, a van you take home each night is a tax-free benefit provided the only private use you (and your family and household) are allowed to make is commuting to and from work. In practice, incidental private use – such as an occasional trip to the rubbish dump or stopping to buy a newspaper en route to work – is overlooked. But using the van to, say, do your weekly shop would breach the rules and bring the van into the taxable benefit rules above.