COMPANY CAR TAX CHANGES

The 6^th April 2002 marks the date that major changes in the ways company cars are taxed will become effective.

The present system of calculating car benefits in kind is to be replaced by one entirely based on the CO2 emissions from the vehicle.

The taxable benefit will be a percentage of the list price of the vehicle and will range from 15% for the most efficient to 35% for the larger more polluting vehicles. The Inland Revenue claim that the new rules will be tax neutral but there will be winners and losers.

Those travelling large distances in high powered vehicles are likely to see a tripling in the level of taxable benefits while those in smaller, more efficient vehicles will see a significant reduction in their tax bill.

Taking this into account employers should carefully consider their position when replacing vehicles. It may also be worth considering employees using their privately owned vehicles with a monthly car allowance and business mileage receivable.