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It’s a simple fact that having a company car can mean your business and/or you will incur substantial tax charges but, with the Government’s continuing crusade for us all to ‘go green’, then driving a “green” car could help to substantially reduce those costs.
Let’s firstly consider the company position:
If your company leases cars, then part of the leasing costs you pay are generally non deductible for tax purposes. However, the disallowance does not apply to “green” cars with carbon dioxide emissions of less than 130g/km (from April 2013).
If your company owns (or hire purchases) cars, then the business is entitled to claim capital allowances on the acquisition cost of the vehicle. These allowances, referred to as writing down allowances, are relieved against your company taxable profit – in simple terms this means that less of your profit is chargeable to tax. The extent of the writing down allowance available depends on the cars carbon dioxide emissions. For example, for cars bought after April 2013 - cars with CO2 emissions of more than 130g/km will attract writing down allowances at only 8% per annum; cars with CO2 emissions of between 95 and 130g/km attract allowances at 18%; cars with CO2 emissions of less than 95g/km could be entitled to 100% relief in the first year. So, as you can see, having a totally “green” car can mean quite a saving in tax for the business.
Now let’s look at your personal position:
If you, as an employee of the company, have private use of company car then you will be charged to income tax on the value of the benefit in kind (the company as your employer also has to pay Class 1A national insurance contributions too!). The value of the benefit is dependent on both the manufacturer’s list price of the vehicle and the ‘appropriate percentage’ applied to that list price. The appropriate percentage is again based on the car’s carbon dioxide emissions, so the more ‘green’ the car the lower the benefit. Indeed, electric cars (or other cars with no CO2 emissions) currently have a 0% rate, so no benefit in kind arises. Imagine - a completely tax neutral car!
So why are we not all driving about in “green” cars already?
Well, “green” cars have in the past had quite high list prices, meaning the benefit in kind could still be substantial despite the lower percentage charge. But with the advancement of technology, the cost to manufacture these low CO2 cars is coming down. In addition, in years gone by, “green” cars have not been very sexy in design but again, design teams all over the world have been busy improving the look of electric cars to make the designs ever more attractive to us.
There are many low emission cars on the market, each with their own merits. Obviously the best car for you will depend on your individual circumstances. However, one of our clients, Ash Gupta (managing Partner of The Gupta Partnership) is an ambassador for the new BMW i3 which he believes is way ahead of the game and heralds a new chapter in cost efficient low carbon motoring.
Ash tells us more:
“I am so proud to have been involved in the introduction of the world’s most advanced electric city car. I have been working with EVs for many decades so to witness the arrival of a car that I feel will do for the auto sector what the apple i-phone has done for cell-phones for me, is a special watershed.
The first vehicle within BMW’s new “i” sub-brand, the BMW i-3 is to my mind, the world’s most desirable electric car or EV as these are now called. The 4 seater i-3 is the very first model from a major auto OEM to have been designed from the ground up as an EV. BMW has invested more behind the i-3 than on any other vehicle in its history.
Apart from being stunning to look at there’s a lot that’s different about the i-3.
On the road price is £30, 680 for the I-3, while the range extender version is £33, 830. In both cases there’s a Government Grant of £5000 to offset this. The wall-box recharge unit has a 75% grant as well. You can lease the i-3 for 36 months with an initial payment of £2995 and 35 monthly rentals of £369 for the basic version, while the top of the range Suite version is just £410 per month.
This month the BMW i-3 will be in showrooms across Britain. I have been appointed as one of the very first BMW i-consultants and will be assisting Eastern BMW at Newbridge now they have been appointed BMW –“i” Dealers. If you would like to find out more about the BMW i-3, or would like a test-drive, please contact me on 0131 312 7771 or mail me at email@example.com “
So as you can see from the enthusiasm by which Ash has outlined the i-3 above (not to mention the good looks of the car as per the photo insert!) electric “green” cars have come a long way and are certainly worth considering given the current tax advantages.
If you would like a helpful list of makes and models of cars with low CO2 emissions (including electric cars) please contact firstname.lastname@example.org or your usual Springfords adviser.