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Company Cars

In order to protect the environment, proposals have been made to increase the tax charges on company cars. There are those that apply from 6 April 1999 and those that will apply from 6 April 2002.



From 6 April 2000 the car benefit charges will continue to be:-



■ 35% of the list price



■ 25% of the list price for business mileage of 2500 and over,



■ 15% of the list price for business mileage of 18,000 and over,



■ the additional relief for cars over 4 years old reduces to 25%.




From 6 April 2002 the present regime outlined above will be abolished. A new regime will be introduced aimed at:



■ removing any incentive to drive unnecessary extra business miles,



■ giving company car drivers and their employers a tax incentive to choose more fuel efficient cars, and



■ encouraging manufacturers to produce cars with lower carbon dioxide emissions.



From 6 April 2002, the company car tax charge will be based on a percentage of the car&#39s price graduated according to the level of the car&#39s carbon dioxide (CO2) emissions. The charge will be 15 per cent of the car&#39s price, for cars emitting 165 grams per kilometre (g/km) CO2, then rise in 1 per cent steps for every additional 5g/km over 165g/km. The maximum charge will be on 35 per


cent of the car&#39s price.



In addition



 The existing business mileage discounts will be abolished when the new system starts.



 Age-related discounts will be abolished at the same time.



 Diesel cars will be subjected to a 3 per cent supplement in recognition of their higher emissions of pollutants that damage local air quality. But this will not take the maximum charge above the current maximum of 35 per cent of the car&#39s price.



 Following further consultation, details will be announced of a waiver for very low emission diesel cars and discounts for other environmentally friendly cars, such as those that run on electricity or a combination of petrol and gas or electricity (which could reduce the charge below the usual minimum of 15 per cent of the car&#39s price).



As stated above the starting point for calculating the tax payable remains the car&#39s price. The charge will be based on a percentage of that price graduated according to the car&#39s carbon dioxide (CO2) emissions measured in grams per kilometre (g/km). The exact CO2 figure will be rounded down to the nearest 5g/km for company car tax purposes.



Cars emitting CO2 at or below a specified level will be taxed on 15 per cent of


the car&#39s price (the usual minimum charge). This qualifying level of CO2 emissions will gradually be reduced over the first few years of the reform. The level of CO2 emissions qualifying for the minimum charge will be as follows:



2002-03 165g/km CO2


2003-04 155g/km CO2


2004-05 145g/km CO2




Cars with no CO2 emissions figure



Cars first registered after 1 January 1998 that have no approved CO2


emissions figure, perhaps because they have been imported from outside the


European Community (EC), will be assessed on engine size as follows:



Engine Size (cc) Percentage of car&#39s price charged to tax



0 &#45 1,400 15 per cent


1,401 &#45 2,000 25 per cent


2,001 and more 35 per cent



If the car is one without a cylinder capacity, it will be taxed on 15 per cent of the car&#39s price (if it is a car propelled solely by electricity), and 35 per cent in all other cases (rotary engine cars).



Older cars



It appears that it will not be possible to gain reliable sources of information on fuel emissions for cars manufacturer before 1 January 1998, therefore, these cars will be taxed according to their engine size as follows:



Engine Size (cc) Percentage of car&#39s price charged to tax



0 &#45 1,400 15 per cent


1,401 &#45 2,000 22 per cent


2,001 and more 32 per cent



Older cars without a cylinder capacity will be taxed on 15 per cent of the car&#39s


price (if it is a car propelled solely by electricity), and 32 per cent in all other cases (rotary engine cars).



Employee Contributions



There are no changes to existing rules. Payments by employees for the


private use of a car will continue to reduce the value of the benefit pound for pound. Contributions of up to £5,000 made by employees towards the cost of the car and/or accessories will continue to reduce its price for tax purposes.



Classic cars



The rules for classic cars remain unchanged. If the car is 15 or more years old at the end of the tax year, and has a market value of £15,000 or more (which is higher than its list price when the car was first registered), the price of the car for tax purposes is its then open market value on the last day of the tax year.



Company car available for only part of the year



The rules remain unchanged. The value of the benefit is reduced proportionately if the car is unavailable for part of the year. The benefit is also reduced if the car is not available for a continuous period of at least 30 days.



Fuel



Car fuel scale charges will be increased from 6 April 2000 by around 20%.

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