Company car tax rules for Gloucestershire companies by ESB Accountancy
The way in which carbon dioxide emissions are measured for company car tax purposes is changing for vehicles first registered on or after 6 April
- The change brings with it tweaks to the appropriate percentages over an introductory period during which cars measured under the new procedures are brought into line with those for cars measured under the existing rules.
It also introduces a zero charge for zero emission cars for one year. Earlier this year, legislation was published in draft for inclusion in the Finance Bill which will give statutory effect to the changes.
Measuring CO2 emissions
An employee who has a company car which is available for their private use is taxed for the privilege. The tax charge is based on a percentage – the appropriate percentage – of the list price of the car and any optional accessories. In turn, the appropriate percentage is based on the level of the car’s carbon dioxide (CO2) emissions, with a supplement of 4% added for diesel cars that do not meet Real Driving Emissions 2 (RDE2) standards. The maximum charge is capped at 37%.
Currently, the level of a car’s CO2 emissions is measured in accordance with the New European Driving Cycle (NEDC). However, for cars registered on or after 6 April 2020 the metric changes and from that date CO2 emissions will be determined in accordance with the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).
From a tax perspective, advisers can be forgiven for thinking ‘so what’ – after all, it’s the level of a car’s CO2 emissions that determine the tax charge, not how the figure is
arrived at. However, the move to the WLTP for determining CO2 emissions brings with it changes to the appropriate percentages over the introductory period.
Car Tax Transitional period
To support the move to measuring carbon dioxide emissions using the WLTP, the appropriate percentage for most cars ?rst registered on or after 6 April 2020 is reduced over a transitional period.
For cars other than zero-emission cars, for 2020/21, the appropriate percentage for cars registered on or after 6 April 2020 is two percentage points lower than that for those registered prior to that date and for 2021/22 the appropriate percentage is one percentage point lower. The ?gures are aligned from 2022/23 onwards. This introduces another stage into the calculation of the car benefit charge.
For 2020/21 and 2021/22, it will be necessary to determine whether the car was registered on or after 6 April 2020 or before that date in order to find the correct appropriate percentage to use.
Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on email@example.com or click the Contact Us buttonor please fill the form at the bottom of the contact us page.