Can my company provide me with a company vehicle?

Yes. An employer can provide vehicles for employees.

Are all the costs of running the vehicle tax deductible in the accounts of the company?

Yes. If the company has all the risks and rewards of owning the vehicle, all running costs can be tax allowable for the business. However the initial purchase cost (capital cost) will be tax allowable through capital allowances. Capital allowances are HMRC’s way of allocating the cost of the vehicle over a number of trading periods to ensure that costs are evenly claimed.

If the vehicle is only used for business use will I have a personal tax liability?

No. Where the vehicle is only used for business use there is no personal tax charge. However the guidance on the distinction between business and personal use are quite strict. For example a company car should NOT be used for commuting between the office and home.

If I use the vehicle for personal use how much tax will I have to pay?

The tax liability will depend on the list price, fuel type, and CO2 emissions of the car. The list price is not the same as the purchase price. The tax liability will then be calculated based on the amount of time the car was available during the tax year.

How is a car’s company car tax rate determined?

The least polluting car models, which are electric vehicles, are allocated a taxable value calculated as 0% of the taxable cost. The highest polluting cars are assessed at 37% of the taxable cost. Further information about electric cars is available on our electric cars advice notes.

For example:

A diesel car with a list price of £25,000, no additional accessories or capital contributions from the employee and CO2 emissions of 170g/km will be assessed at 37% in 2020/21.

The benefit in kind value is, therefore, £9,250 (£25,000 x 37%).

The £9,250 is added to your taxable income.

For a higher rate income tax payer the tax charge for 2020/21 for this vehicle would be £3,700.

Company cars - petrol or diesel?

Diesel cars have a higher percentage charge compared to petrol models, with similar emissions.

How is the taxable value reported to HMRC?

The details of company vehicles and the relevant taxable value or benefit to the employee is reported on a form P11D by the employer at the end of each tax year. The employee should receive the details included on the P11D by 06 July following the end of the applicable tax year. Any changes in company vehicles during a tax year should be reported by the employer to HMRC at the time of the change.

Can I reduce my tax liability for a vehicle?

You can reduce your liability by making payments to your employer towards the cost of the vehicle or towards the running costs of the vehicle.

Do I have to pay for fuel?

If the car is not used for private use the business can pay for the fuel. If the car is used for private use and the business pays for the fuel there will also be a car fuel benefit charge to the individual. The car fuel benefit charge is calculated using a fixed multiplier of £24,500 for the 2020/21 tax year, regardless of how much fuel was used personally.

Can my employer provide an electric charging point for the company electric car?

Yes. From 06 April 2018 no benefit in kind will arise where fuel is provided for an electric car.

Is there a difference in the tax liability if the vehicle is classified as a van?

Yes. If the vehicle is classified as a van the cash equivalent benefit for 2020/21 is calculated £3,490. This amount can be time apportioned if the van was only available for private use for part of the tax year.

Do I have to pay tax if I get fuel in a van?

Yes if there is any significant private use. In 2020/21 the drivers would be taxed on a fuel benefit of £666. Similarly, this amount can be time apportioned if the van fuel was only available for private use for part of the tax year.

If I pay for all my private fuel do I have a tax liability?

If you pay for the full cost of fuel for private travel and/or only claim business mileage at HMRC’s approved rates then you will not have to pay private fuel tax.

If you would like to discuss any of the issues noted above please contact us on:

01244 625 500 or 01978 364 000

contactus@foremansllp.com

Whilst all due care and attention has been taken in the preparation of these notes no liability can be accepted for any omission or item contained therein. 

Foremans LLP

December 2020