At the time of the 2005 Budget, it was announced that changes were to be made to the discounts and supplements that apply to car and fuel benefits charges for company cars from 6 April 2006. The changes have now been confirmed in the Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2005.

The changes are as follows:

• Diesel cars registered on or after 1 January 1998 that are compliant with European 'Euro 4' emission standards have been exempt from the 3% supplement - that supplement is reinstated for any such cars that are registered on or after 1 January 2006, the date on which all diesel cars sold in the UK must be Euro 4 compliant. As announced at the time of the Budget, the resulting increases in the car and fuel benefit charges will only apply to such cars from the 2006/07 tax year. However, the supplement is not reinstated for Euro 4 compliant diesel cars that are registered before 1 January 2006.
  
  
• Hybrid cars, i.e. those capable of being propelled by electricity and diesel, currently enjoy a discount from the percentage used to calculate the car and fuel benefit charges of 2%, plus a further 1% for each 20 grams per kilometre by which the registered CO2 emission figure for the car falls below the minimum threshold for the tax year (140 g/km). The discount is changed from 6 April 2006 to a straight 3% discount.
  
  
• Cars that run on road fuel gas (e.g. LPG) and bi-fuel cars (i.e. cars registered on or after 1 January 2000 that can run on two different fuels and that have a separate CO2 emission figures for each type of fuel) enjoy a discount of 1%, plus a further 1% for 20 each grams per kilometre by which the registered CO2 emission figure for the car falls below the minimum threshold for the tax year (140 g/km). This discount is changed to a straight 2% discount from 6 April 2005. It is the lower of the two CO2 emission figures that is usually quoted on the car's V5 registration document.
  
  
• Other bi-fuel cars (i.e. registered on or after 1 January 1998 with only a CO2 emission figure for petrol or that have been converted to bi-fuel after type approval) currently have a discount of 1%. That discount is removed altogether from 1 April 2006. The provision that allows the cost of conversion to be excluded from the list price remains in force.

The following table shows the discounts and supplements as they will apply from the 2006/07 tax year.

...back to 18 August 2005


Sources:
The Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) (Amendment) Regulations 2005

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