New Tax Laws Impact Company Car Leasing Policy
Small Business News – 16th February 2009
Companies need to act now or face being disadvantaged by the tax changes which come into force in April 2009.
Changes to vehicle excise duty, capital allowances and the expensive car leasing disallowance rules were announced in the March 2008 Budget.
All the changes are linked to CO2 emissions, with the key cut off point for cars being 160g/km of CO2. Essentially, the new capital allowance regime favors vehicles that emit 160g/km of CO2 or less.
For companies due to order their vehicles in January there is an urgent need to review their car policy now as the vehicles will arrive after April 1 and therefore be affected by the tax changes.
In simple terms, it is better for cars emitting 161g/km CO2 or above to be delivered before the end of March 2009. For cars that emit 160g/km CO2 or less it is better for them to delivered after April 2009.
However, the implications of the new tax laws will affect every company in a different way, so make sure you seek advice to ensure clarity on your position. The decision is a finance-based one and tax is a technical area.
Further complicating matters is the fact that the traditional method of evaluating funding methods has been thrown up in the air by the tax changes.
So, what should companies do?
Firstly, research and understand what the implications of the tax changes are for the business. Secondly seek advice from a vehicle expert who should review the impact on a vehicle-by-vehicle basis.
This type of analysis is available from leasing companies and it should allow directors to compare vehicles pre and post the tax changes. Once a review has been carried out, a solution needs to be agreed and the company car policy then needs to be matched to that solution.
Ideally, companies should be setting out a company car policy that either restricts or encourages drivers into cars that emit 160g/km CO2 or less. This has the benefit of enhancing the environmental performance of their fleet. This would be improved further if the vehicles emit 110g/km CO2 or less.
The other benefit is the potential to reduce fuel costs because the general rule is that cars with lower emissions have more efficient fuel economy. Although fuel prices have dropped recently there is still a threat that in the future they will rise again.
In light of this, and the tax changes, it’s now time for companies who have not yet considered CO2 emissions to start taking them more seriously and look at reducing their company car fleet’s total emissions.
But the most important thing to is to start researching now! If you delay reviewing your car policy it could be too late.
Mel Goodliffe, Managing Director, FLEXXiLease