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Summary
For the 2010/11 tax year:

• the multiplier for the car fuel benefit charge increases from £16,900 to £18,000
• the van fuel scale charge increases from £500 to £550.

There are no changes to the measures already announced in Budget 2009 for the calculation of the car benefit charge for the 2011/12 tax year.

For the 2012/13 tax year, the percentage charge for each 5-point band of CO2 emissions will be changed so that the minimum 10% charge will apply to cars with CO2 emission ratings of below 100 g/km.  As already announced, the percentage charges will range from 10% up to 35%, with the highest charge applying to cars with emission ratings of 220 g/km and higher.

Detail

Car and van benefit charges

Budget 2009 announced a number of changes to the calculation of the car benefit charge from the 2011/12 tax year, namely

• abolition of the £80,000 “price cap” that is applied to the list price of a company car in order to limit its cash equivalent,
• a further reduction in the CO2 emission ranges used to determine the “appropriate percentage” of a car, to between a 15% charge at 125 g/km and a 35% charge at 225 g/km,
• a cosmetic change to the “appropriate percentage” for electrically-propelled cars, reducing it to a straight 9% rather than the current arrangement of applying a 6 percentage point reduction to the 15% charge, and
• abolition of the discounts applicable to
  • hybrid (electric and petrol) cars,
  • bi-fuel (petrol and road fuel gas) cars,
  • bio-ethanol cars, and
  • Euro 4 compliant diesel cars, registered before 1 January 2006,with the effect that, in all cases, a car’s “appropriate percentage” will derive solely from its CO2 emission rating.

Further changes were announced that will apply from the 2012/13 tax year, namely

• abolition of the 10% charge for “qualifying low emissions” cars (QUALECS),
• a new range of “appropriate percentages” that start at 10% instead of 15%, and
• removal (unconfirmed) of the 3% diesel supplement for Euro 6 compliance diesel cars.

The 2009 Pre-Budget Report (PBR2009) clarified the broader CO2 emission range that will be used from 2012/13.  The 10% charge will apply to cars with CO2 emissions of less than 100 g/km.  The charging structure between 2009/10 and 2012/13 is shown in the Table below.  The shaded boxes show the increases in the “appropriate percentages” over the four years for a petrol car with a CO2 emission rating of 150 g/km.

Other changes announced in PBR2009 are:

• a reduction for a five-year period, starting from April 2010, of
  • the “appropriate percentage” for electric cars, from 9% to 0%, starting from April 2010, and
  • the flat rate company van charge for electric vans, from £3,000 to nil,thereby removing both the tax charge for employees and the Class 1A NICs charge for employers
• the introduction, from 1 April 2010 for corporation tax and from 6 April 2010 for income tax, of a 100% first year capital allowance for the purchase of new and unused electric vans.

Car and van fuel benefit charges

Where employees are provided with a company car and with fuel for private use, a fuel benefit charge applies in addition to the car benefit charge.  The fuel benefit charge is calculated by multiplying a fixed value, set at £16,900 for 2009/10, by the car’s “appropriate percentage”.  For the 2010/11 tax year, the multiplier increases to £18,000.

Where employees are provided with a company van and with fuel for private use, a fuel benefit charge applies in addition to the van benefit charge.  This current scale charge of £500 increases to £550 for the 2010/11 tax year.

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Written by Ian Congreave -

Filed under: Budget Reports, Pre-Budget Reports on December 18th, 2009

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