Manufacturing businesses typically either run a fleet of vehicles and/or pay car allowances to certain staff. However, tax relief for cars bought by companies on or after 1 April 2009 has changed completely. Emissions, as opposed to cost, is the main factor.
High emission cars (>160 g/km)
Cars bought before 1 April 2009 costing over £12,000 qualified for a maximum annual allowance of only £3,000. When the car was sold there was a ‘balancing allowance’, so total allowances equated to the cost of the car less proceeds.
Cars bought on or after 1 April 2009 qualify for 10% annual allowance on a reducing basis. However, balancing allowances have been scrapped so when the car is sold, the balance of the cost continues to be written off at 10% per year.
Example:
A car that costs £50,000, with emissions of over 160 g/km, is sold for £20,000 after 4 years. The net cost therefore is £30,000.
If bought in March 2009 the allowances would be £12,000 and a balancing allowance of £18,000 making £30,000 in total.
The same car bought in April 2009 would qualify for allowances of about £17,000 but with no balancing allowance the remaining cost of £13,000 (after deducting the £20,000 sale proceeds) would not be fully written off for many years.
Summary:
Allowances in first 4 years under old rules: £30,000
Allowances in first 4 years under new rules: £17,000
Low emission cars (<110 g/km)
At the other end of the scale is a 100% allowance in year one for low emission cars. Certain models of Mini, Fiesta, Polo, Golf, Volvo and Toyota qualify for 100% allowances.
The inbetweeners
Cars with emissions between 110 and 160 g/km are given tax relief similar to the higher emission cars, but with a rate of 20% per annum as opposed to 10%.
Vans
Some double-cab pickups and commercial versions of SUVs qualify as vans. Vans get allowances in the same way as other plant and machinery, which can be as much as 100%.
Conclusion
You should be reviewing the impact of the above on your company car policy and decide whether there should be changes to the types of car acquired; frequency of change; position with regards to vans; or whether you scrap company cars altogether.