IN THIS EDITION

• Tax Giveaway for Green Motorists
• VAT Increase

Green Motorists

The EU’s long term target is that average new car CO2 emissions will be 100grams/km by 2020.

With the governments declared objective of meeting this target there are tax incentives for companies to buy new low emission cars for directors and employees. Not surprisingly there is generally a tax disincentive for purchasing cars with high emissions.

Main tax advantages are gained when a company purchases a new car whose emissions are no greater than 110g/km.

• The tax advantages are:-

• The full cost of the car is allowed against company profits in the year of purchase
• The benefit in kind charged on the employee is only 10% of the list price of the car (13% if a Diesel)
• There is no requirement for the car to be used for company business or by the employee concerned. It can be used by the director, employees, spouse or children.

• The other non tax financial advantages are:-

• The vehicle excise duty will be much reduced and even be nil if the CO2 emissions are no more than 100g/km.
• Other costs such are insurance and depreciation are likely to be lower
• Most people will find significant fuel cost savings.

An example of the car that meets these criteria is the VW Polo Blue Motion.

• Fuel economy extra urban 88.3mpg
• CO2 emissions 99g/km
• Road fund licence cost £nil

Assuming an annual mileage of 10,000 per annum the cost savings including fuel, vehicle excise duty and depreciation should be well in excess of £2,000 per annum. In addition the company will receive full tax relief (at probably the small company rate of 21%) on the full purchase cost of the car.

The tax rules relating to higher emission cars have changed recently and if you require advice as to the tax consequences of purchasing a particular car or want advice on the best way to finance this please contact us.

Ready to Face 17.5% VAT?

The temporary reduction in the rate of VAT to 15% ends on 31 December 2009. Is your business ready for the increase to 17.5% that will take effect from 1 January 2010?

For further details on the VAT increase and possible tax savings please see the winter edition of our journal

If you are in any doubt as to whether any of these matters may affect your business and/or personal tax situation please do not hesitate to contact Keith Hardy on 01483 225457 email keith@smithpearman.com