Changes to taxation of cars owned by companies
April 2009
Exctracts from the full article; which can be found here
Far ranging changes to tax allowances for Company Cars will be introduced from April 2009 and we are putting this memo together to outline their impact so that you can consider your approach to how you deal with motor car purchases going forward.
Currently, the actual capital cost of owning cars (i.e. purchase price less sales proceeds) with an original cost over £12,000 (referred to as “expensive cars”) is offset against profits earned essentially during the life of the car using the capital allowances regime (So if you buy a car for £18,000 and sell it for £8,000 you will claim an overall deduction against tax of £10,000).
The main changes which only apply to new cars purchased after 6 April 2009, dictate that the cost of the car is spread over a period longer than the vehicle’s life. Does this matter? Well, except for the most C02 efficient cars, you will have to wait many years to get the full tax benefit. Unbelievably you could still be claiming tax allowances on some of these vehicles 60 years later!
Possible Solutions to consider
• Operate cars which have very low CO2 emissions
• Consider using contract hire or lease cars from April 2009
• Introduce cash-for-car type arrangements and avoid operating any new company cars going forward.
• For larger fleets of cars, it would be worth considering setting up a leasing company to hire the vehicles back to the company.
Conclusion:
Firstly to get a full consideration of this subject, with examples please download the article here
The purpose of this document is to set out the broad changes and principles that are unfolding with regard to how tax relief for motor vehicles is changing. It is not intended to make any recommendations as each case will depend upon its own merits.
If you feel that a more in depth discussion or consideration on this matter is required, then please feel free to get in touch.
Kind Regards
Mark Andrews