Budget 2012 headlines

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2 Budget 2012 headlines The Coalition Government s third Budget statement contained a number of announcements impacting on the UK company car and van market. These are: Company car tax rates for five years to 2016/17 published Five year benefit-in-kind tax exemption for zero carbon and ultra low carbon emission vehicles to end from April 2015 Removal of the 3% diesel supplement from April 2016 Car fuel benefit charge to rise from 18,800 to 20,200 in 2012/13 and by 2% above the rate of inflation in 2013/14 Van benefit charge frozen at 3,000 in 2012/13 The five year exemption for zero carbon vans from the van benefit-inkind charge will expire from April 2015 Van fuel benefit charge frozen for 2012/13 but to rise by the rate of inflation in 2013/14 The 100% first year capital allowance for businesses purchasing low emissions cars extended to 31 March, 2015 The CO2 emissions threshold below which cars are eligible for first year capital allowance cut from 110g/km to 95g/km from April 2013 Leased business cars no longer eligible for the first year capital allowance from April 2013 The CO2 emissions threshold for the main rate of capital allowances for business cars reduced from 160g/km to 130g/km from April The threshold above which the lease rental restriction applies also reduced from 160g/km to 130g/km Inflation-linked increase to car and van Vehicle Excise Duty rates from 1 April, 2012 The previously announced 3.02p per litre fuel duty increase due on 1 August, 2012 will go ahead No change in Class 1A National Insurance rates No change in tax-free Authorised Mileage Allowance Payment rates. 2 We re with you all the way

3 Polo: urban 35.3/ /4.2; extra urban (55.4/5.1) 91.1/3.1; combined 47.9/ /3.5. CO ( ) Automatic figures Vehicle Excise Duty (VED) On 1 April, 2012, VED - most standard Elsewhere, across the 13-band system, rates and first year rates - increased in there were increases in standard and line with the rate of inflation. first year rates ranging from 5 for However, standard VED rates for cars most categories to 30 in the first year with up to 120g/km CO2 were frozen. rate for vehicles emitting more than Additionally, first year rates for cars 255g/km. emitting up to 130g/km remain at 0. We re with you all the way 3

4 Vehicle Excise Duty from 1 April, 2012 for cars registered on or after 1 March, 2001 VED band CO2 emissions (g/km) 2012/2013 First year rate* 2012/2013 Standard rate* A Up to B C D E F G H I J K** L M Above 255 1, *Alternative fuel discount 2012/13 10 all cars ** Includes cars emitting over 225g/km registered before 23 March, We re with you all the way

5 Company car tax 2012/13 to 2016/17 The start of the 2012/13 tax year heralds the introduction of a radical shake up in company car benefit-in-kind tax with the abolition of the of the so called QUALEC (Qualifying Low Emission Car) category. However, as a result of fleet industry requests to enable vehicle choice list planning as a consequence of extended replacement cycles, the Government has given advanced notice of tax levels for the financial years up to and including 2016/17 (see table page 6-7). Additionally, in the Budget, as well as confirming already announced tax levels for 2012/13 and 2013/14 the Government revealed a number of other significant changes for 2014/15, 2015/16 and 2016/17. They are: A further tightening of company car tax thresholds by one percentage point for cars emitting more than 75g/km of CO2, to a maximum of 35% in 2014/15, and by two percentage points, to a maximum of 37% in both 2015/16 and 2016/17. From April 2015, the current five year exemption for zero carbon and ultra low carbon emission vehicles will end. The appropriate percentage for zero emission electric cars and low carbon vehicles will be 13% from April 2015 and will increase by two percentage points to 15% in 2016/17. From April 2016, the Government will remove the 3% diesel supplement differential so that diesel cars will be subject to the same level of tax as other cars. HM Revenue & Customs has calculated that the increase in newly announced company car tax rates will on average result in an employee driving a petrolengined car paying an additional 70 in 2014/15, 165 in 2015/16 and 165 in 2016/17. Meanwhile, an employee driving a diesel company car will see average increases of 85 in 2014/15 and 190 in 2015/16, followed by a reduction of 85 in 2016/17 when the 3% diesel supplement is removed. We re with you all the way 5

6 Company car tax 2012/13 to 2016/17 % of P11D Price 2012/ / / / / N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Up to the end of tax year 2014/15 add 3% for diesel cars up to a maximum of 35% For tax year 2015/16 add 3% for diesel cars up to a maximum of 37% 6 We re with you all the way

7 % of P11D Price 2012/ / / / / N/A N/A N/A N/A N/A N/A In 2016/17 petrol and diesel cars treated equally for company car tax purposes. We re with you all the way 7

8 Capital allowances and lease rental restriction HM Treasury s previously announced reduction in the main rate of capital allowances on plant and machinery, which includes vans and cars, came into effect from 1 April, Capital allowance denotes the rate at which companies can write down the cost of buying the vehicle against their taxable profits. Vehicles are separated into three pools. Vehicles up to 110g/km: companies can write down the full cost against their taxable profits in the first year of ownership. Vehicles emitting g/km: companies can write down 18% of the cost of the vehicle against their taxable profits each year, on a reducing balance basis (previously 20%). Vehicles above 160g/km: companies can write down 8% of the cost against their taxable profits each year, on a reducing balance basis (previously 10%). Cars already on fleet prior to the April 2009 change to an emissions based structure will continue to be administered under the previous price based system until disposal under transition period rules. However, the Chancellor has also announced further changes in capital allowances business car rules, which will become effective in 12 months time (2013/14). From April 2013, the Government will extend the 100% first year allowance for businesses purchasing low emissions cars for a further two years to 31 March, Simultaneously the CO2 emissions threshold below which cars are eligible for the first year allowance is reduced from 110g/km to 95g/km, and leased business cars will no longer be eligible for the first year allowance. Additionally, the CO2 emissions threshold for the main rate of capital allowances for business cars will reduce from 160g/km to 130g/km. 8 We re with you all the way

9 Lease rental restriction The rules affecting lease rental restriction - the amount of the lease rental payments claimable against corporation tax - were reformed in line with the new emissions-based capital allowance legislation. In 2012/13 cars leased after 1 April, 2009, are treated in one of two ways: Cars with emissions of 160g/km or less face no lease rental restriction, meaning that the cost of the lease is fully deductible against taxable corporate profits. Cars with emissions of 161g/km or more face a 15% lease rental restriction, meaning companies can only deduct 85% of any rental payments against their taxable profits. However, the threshold above which the lease rental restriction applies will reduce from 160g/km to 130g/km from April 2013 in line with the threshold for the main rate of capital allowances for business cars. In relation to leases that started before 1 April, 2009, all lease rental payments for cars costing more than 12,000 are subject to the old rules until termination of the lease. Passat: urban (26.2/10.8) 54.3/5.2; extra urban (47.9/5.9) 78.5/3.6: combined (36.7/7.7) 68.9/4.1. CO2 109 (180) ( ) Automatic figures We re with you all the way 9

10 Efficiency and economy with BlueMotion Volkswagen s engineers are constantly working to produce cars that offer great performance with better fuel economy and fewer harmful emissions. Our BlueMotion and BlueMotion Technology models are the most efficient and economical within the range. Cars which wear the BlueMotion badge (available in Polo, Golf, Passat and Passat Estate ranges) offer customers the highest level of economy and exemplary environmental credentials. Those models feature the full complement of Volkswagen s innovative range of energy-saving technologies, from automatic start-stop to low rolling resistance tyres, which work in synergy with advanced common rail diesel engines and gearboxes to cut fuel consumption and reduce harmful emissions. Other fuel-saving features include improved aerodynamics and battery regeneration. The combination of these features helps to reduce the day-to-day costs of running a fleet, as well as its environmental impact. The breadth of BlueMotion Technology modifications varies from model range to model range. But whatever company car you re looking for, there s sure to be one with a BlueMotion Technology variant as the line-up now includes Golf, Golf Plus, Golf Estate, Golf Cabriolet, Scirocco, Jetta, Passat, Passat Estate, Volkswagen CC, Eos, Tiguan, Touran, Sharan and Touareg, as well as the most recent addition to the range, the up! Featuring a Stop/Start function, battery regeneration and a multifunction computer which displays visual gear change recommendations for optimum fuel consumption, cars which display a unique BlueMotion Technologies badge strike a balance between reducing fleet costs and maintaining the driver s safety and comfort. Passat Estate: urban (25.9/10.9) 54.3/5.2; extra urban (46.3/6.1) 74.3/3.8; combined (35.8/7.9) 65.7/4.3. CO2 113 (183) ( ) Automatic figures 10 We re with you all the way

11 Class 1A National Insurance Contributions Employers pay Class 1A National Insurance Contributions (NIC) on company cars and fuel at 13.8%. As with company car tax, the NIC is directly linked to the P11D value and the CO2 emission figure of a vehicle. As the company car tax table (page 6-7) highlights, emission thresholds Example 1 Vehicle: Volkswagen Golf BlueMotion TDI 5dr PS P11D price: 19,390 CO2 emissions: 99g/km 2012/13 (13% BIK rate) Cash value (P11D x BIK): 19,390 x 13% = 2,521 Employers Class 1A NIC: 2,521 x 13.8% = /14 (14% BIK rate) Cash value (P11D x BIK): 19,390 x 14% = 2,715 Employers Class 1A NIC: 2,715 x 13.8% = /17 (16% BIK rate) Cash value (P11D x BIK): 19,390 x 16% = 3,102 Employers Class 1A NIC: 3,102 x 13.8% = 428 have tightened in 2012/13 and will tighten further in future years. The only way that employers can limit a year-on-year increase in their NIC is to ensure choice lists feature models with the lowest possible emissions figure. Sample calculations below highlight the impact of the tax changes on NIC. Example 2 Vehicle: Volkswagen Passat SE TDI BlueMotion Technology PS P11D price: 22,205 CO2 emissions: 119g/km 2012/13 (17% BIK rate) Cash value (P11D x BIK): 22,205 x 17% = 3,775 Employers Class 1A NIC: 3,775 x 13.8% = /14 (18% BIK rate) Cash value (P11D x BIK): 22,205 x 18% = 3,997 Employers Class 1A NIC: 3,997 x 13.8% = /17 (20% BIK rate) Cash value (P11D x BIK): 22,205 x 20% = 4,441 Employers Class 1A NIC: 4,441 x 13.8% = 613 We re with you all the way 11

12 Mileage reimbursement rates The HM Revenue and Customs Authorised Mileage Allowance Payments (AMAPs) set tax and National Insurance exempted rates claimable for business mileage in a private car. For 2012/13 the rate of reclaim for the first 10,000 miles remains at 45p per mile and 25p per mile thereafter. In addition to claiming AMAP rates, an allowance for passengers (employees and volunteers) at 5p per mile can also be paid tax and National Insurance free. If the AMAP rate paid to an employee exceeds the approved amount for the tax year, then: For employees earning less than 8,500 there is no reporting requirement Regardless of an employee s earnings, the employer has no tax to pay to HMRC If the AMAP rate paid to an employee is below the approved amount for the tax year the employer has no reporting requirements or tax to pay to HMRC. However, the employee will be able to obtain tax relief (called Mileage Allowance Relief) on the unused balance of the approved amount. For company directors or employees earning 8,500 or more per year, the excess amount should be reported on form P11D as tax is due from the employee AMAP rates Up to 10,000 miles Over 10,000 miles All cars 45p 25p Golf: urban 23.9/ /4.7; extra urban (41.5/6.8) 83.1/3.4; combined 33.2/ /3.8. CO ( ) Automatic figures 12 We re with you all the way

13 Employer-provided fuel for private mileage Employees pay benefit-in-kind tax on fuel for private use paid for by their employer, while the company must pay Class 1A NIC on the taxable scale charge. The charge is linked to a set figure, known as the fuel benefit charge multiplier. In 2012/13 the figure is 20,200, up from 18,800. The charge will rise by 2% above inflation in 2013/14. A separate figure applies for vans (see page 15). 2012/13: Calculating your free fuel liability To calculate benefit-in-kind liability on fuel for private use, you need to know: The combined cycle fuel consumption of your company car The CO2 emissions in g/km and the linked benefit-in-kind tax percentage The price of fuel used The marginal tax rate of the driver (20% or 40%) The Government s fuel benefit charge multiplier (now 20,200) Example 1 - the driver s view Vehicle: Volkswagen Golf BlueMotion TDI 5dr PS CO2 emissions: 99g/km Fuel economy: combined 74.3mpg Benefit-in-kind tax: 13% (2012/13) Taxable value (fuel benefit charge multiplier x BIK): 20,200 x 13% = 2,626 Tax charge for a 20% taxpayer: 525 (worth 359 litres of diesel) Breakeven is 5,883 private miles Tax charge for a 40% taxpayer: 1,050 (worth 718 litres of diesel) Breakeven is 11,766 private miles Example 2 - the employer s view To calculate the cost of providing fuel for private use employers must know: Cost of fuel, VAT rate, VAT fuel scale charge linked to CO2, Class 1A NIC rate, Corporation Tax rate Fuel cost (10,000 private miles at 1.46 pence per litre): VAT recovery at 20%: ( ) VAT fuel scale charge: Class 1A NIC: Total: 1, Corporation tax at 24%: ( ) Net cost to company of providing free fuel: We re with you all the way 13

14 Commercial vehicles 2012/13 Company light commercial vehicles used privately incur benefit-in-kind tax for the driver, based on a taxable value of 3,000 in 2012/13. All electric vans are exempt from benefit-in-kind tax until the end of the 2014/15 financial year. If free fuel is also provided by the employer for private mileage an additional van fuel benefit charge applies. The charge for 2012/13 is 550 but will increase by the RPI in 2013/14. The annual tax payable for private use of a van in 2012/13 is: For a 20% taxpayer: 3,000 x 20% = 600 For a 40% taxpayer: 3,000 x 40% = 1,200 If fuel for private use is provided then the tax charge for 2012/13 is: For a 20% taxpayer: 550 x 20% = 110 For a 40% taxpayer: 550 x 40% = We re with you all the way

15 Class 1A National Insurance - vans Employer Class 1A National Insurance contributions for vans are calculated on the same basis as benefit-in-kind tax liabilities. The amounts payable are calculated by multiplying the taxable values by 13.8%. The example (below) shows the levels of contribution. Class 1A National Insurance private use of a van ( 3,000 x 13.8%): 414 Class 1A National Insurance private use of fuel ( 550 x 13.8%): 76 Capital allowances - vans A 100% first year capital allowance applies on the purchase of electric vans. Vehicle Excise Duty - vans registered on or after 1 March, 2001 Registered on/after 1 March, 2001 (not over 3,500kg revenue weight): 215 Euro 4 light goods vehicles registered between 1 March, 2003, and 31 December, 2006 (not over 3,500kg revenue weight): 135 Euro 5 light goods vehicles registered between 1 January, 2009, and 31 December, 2010 (not over 3,500kg revenue weight): 135 For more information on the Volkswagen Commercial Vehicle range visit The explanations and data set out in this guide are for general information only, and though given in good faith, are given without any warranty as to their accuracy. Please refer to your legal or tax adviser for individual professional advice. All information correct at date of publication, April Fuel consumption figures shown are mpg/ltr per 100 km for the Urban, Extra-urban and Combined fuel cycles in accordance with EU Directive 99/94. For more information on the Volkswagen model range or to request a test drive, call the Fleet Business Centre on or visit We re with you all the way 15

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