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10:45 on Friday
20 February 2004

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Changes in the Taxation of Company Cars


As many of you may have read in recent months, there is a major change taking place in the method of calculating the taxable benefit-in-kind of the use of a Company Car. This will take effect from the 6th April 2002 and the change moves away from the historical method of taxing company cars on the quantity of business miles performed in the year. No longer will there be any advantage for a taxpayer who is driving more than 18000 business miles in any tax year, nor for anyone driving an older car.

From 2002/03 onwards, the vast majority of company cars will be taxed on a percentage of their list price. This percentage will vary according to the level of their carbon dioxide emissions but there will be discounts for cars registered on or after the 1st January 1998 which run on alternative fuels and technologies i.e. 'cleaner' cars. From that same date, those company car drivers whose vehicles use diesel fuel, their new car benefit will attract a 3% supplement.

With major changes taking place it is inevitable that there will be teething problems and experience is already showing that many new PAYE Coding Notices being issued by the Inland Revenue, for 2002/03, are inaccurate. If these are not quickly corrected, taxpayers could find that the tax deductions being made from their salaries are inappropriate and, in some instances, could face an increased tax bill at the end of the tax year.

To avoid any surprises, whether welcome or not, our taxation advisors will be happy to check that your PAYE Coding Notices are correct.

For more help and information visit
www.ietaxguard.co.uk

February 2002

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