Volkswagen Company Car and Van Tax Guide 2015/2016.

Transcription

1 Volkswagen Company Car and Van Tax Guide 2015/2016.

2 Budget 2015 headlines The coalition Government s sixth and final budget, ahead of the 2015 general election, contained a number of announcements impacting on the UK company car and van market. These are: Company car benefit-in-kind tax (BIK) thresholds for 2019/20 were published. Rates are now known for the next five financial years. The appropriate percentage of list price subject to tax will increase by three percentage points for all cars, irrespective of their CO2 emissions, in 2019/20, up to a maximum of 37%. The appropriate percentage of list price subject to tax of ultra-low emission vehicles (ULEVs) 75g/km and less is lower than previously announced (see page 5). The Government will review incentives for ULEVs in the light of market developments at Budget 2016, to inform decisions on company car tax from 2020/21 onwards. Inflation-linked increases to car and van Vehicle Excise Duty (VED) from April 1, 2015, although the increase only applies to higher carbon dioxide emitting vehicles (see page 3). The planned 0.54p per litre + VAT fuel duty increase due on September 1, 2015, is cancelled. The year-on-year fuel duty freeze by the Government, over five years, is calculated to have saved a typical motorist 675, and 1,400 for a small business with a van, by the end of 2015/16. Car fuel benefit charge to rise from 21,700 in 2014/15 to 22,100 in 2015/16, and by inflation in 2016/17. Van benefit charge to rise from 3,090 in 2014/15 to 3,150 in 2015/16, and by inflation in 2016/17. Van benefit charge support for zero emission vans is to be extended to April 5, 2020, on a tapered basis. From 2015/16, the charge paid by zero-emission vans (0% in 2014/15) will be 20% of the rate paid by conventionally-fuelled vans, followed by 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 and 90% in 2019/20. 2

3 The rates will be equalised in 2020/21, when there will be a single benefit charge applying to all vans. Van fuel benefit charge to rise from 581 in 2014/15 to 594 in 2015/16 and by inflation in 2016/17. No new announcements in car capital allowances or lease rental restriction rules. But, as announced in Budget 2014, from April 1, 2015, the CO2 threshold at which the 100% capital allowance applies reduces from 95g/km to 75g/km. Main rate of corporation tax is cut from 21% in 2014/15 to 20% in 2015/16 and will remain unchanged in 2016/17. No change in Class 1A National Insurance rates. No change in tax-free Approved Mileage Allowance Payment (AMAP) rates. Vehicle Excise Duty (VED) On April 1, 2015, VED standard and first-year rates increased in line with inflation. However, in reality the increase in first-year rates applied only to cars in Band H and above and the rise in the standard rate to cars in B and K and above. Golf: official government fuel consumption figures in mpg (litres per 100km): urban 30.1 (9.4) 74.3 (3.8), extra urban 47.9 (5.9) 94.2 (3.0), combined 39.8 (7.1) 88.3 (3.2). CO2 emissions 165 0g/km. This information is based on 2015 Model Year. 3

4 Vehicle Excise Duty from April 1, 2015, for cars registered on or after March 1, 2001 CO2 VED band emissions (g/km) 2015/2016 First-year rate* 2015/2016 Standard rate* A Up to B C D E F G H I J K** L M Over 255 1, *Alternative fuel discount of 10 applies to all cars in 2015/16 ** Includes cars emitting over 225g/km registered before March 23,

5 Company car tax 2015/16 to 2019/20 The Government confirmed previously announced company car BIK tax rates for all cars up to the end of 2018/19. It then announced company car tax rates for 2019/20, making thresholds for a full five years known. That enables fleet decision-makers and company car drivers to select vehicles in the full knowledge of their future tax liability. In 2019/20 the appropriate percentage of list price subject to tax will increase by three percentage points for all cars, irrespective of CO2 emissions, up to a maximum of 37%. To encourage a new generation of low-emission vehicles, such as electric and plug-in hybrid models, the Government is to increase tax rates on the two lowest thresholds 0-50g/km and 51-75g/km by less than planned. In Budget 2014, the Government announced that in 2019/20 there would be a two percentage point differential between 0-50g/km and 51-75g/km and 51-75g/km and 76-94g/km bands. That would have resulted in the 0-50g/km band increasing by five percentage points in 2019/20 to 18% and the 51-75g/km band by four percentage points to 20%. The impact of increasing the two band rates more slowly by three percentage points means the 2019/20 rates for 0-50g/km cars is 16% and for 51-75g/km is 19%. Additionally, the Government will review incentives for ultra-low emission vehicles in the light of market developments at Budget 2016, to inform decisions on company car tax from 2020/21 onwards. 2015/16 is the final year for which the 3% company car tax surcharge applies to diesel vehicles. From 2016/17, as previously announced, petrol and diesel cars will be treated equally for company car tax purposes, so company car drivers who choose diesel cars will see tax bills reduce in 2016/17 before rising again in 2017/18. That s because company car tax rates will increase by two percentage points in 2016/17, but the abolition of the 3% surcharge means drivers of diesel models will see their tax bills reduce by one percentage point when compared with 2015/16, before rising two percentage points in 2017/18. 5

6 Company car tax 2015/16 to 2019/20 % of P11D Price 2015/ / / / /20 0 N/A N/A N/A N/A N/A N/A N/A N/A N/A 7 N/A 0-50 N/A N/A N/A N/A 0-50 N/A N/A 10 N/A N/A N/A N/A N/A 11 N/A N/A N/A N/A 12 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 N/A N/A N/A N/A N/A N/A N/A N/A For tax year 2015/16 add 3% for diesel cars up to a maximum of 37%. 6

7 % of P11D Price 2015/ / / / / From 2016/17 petrol and diesel cars are treated equally for company car tax purposes. 7

8 Capital allowances and lease rental restriction In 2015/16 a tightening of capital allowance emission thresholds comes into effect following an announcement two years ago. From April 1, 2015, thresholds for capital allowances on cars bought outright are: Vehicles up to 75g/km (reduced from 95g/km): companies can write down the full cost against their taxable profits. Vehicles emitting g/km (reduced from g/km): companies can write down 18% of the cost of the car against their taxable profits each year, on a reducing balance basis. Vehicles above 130g/km: companies can write down 8% of the cost of the car against their taxable profits each year, on a reducing balance basis. All ULEVs (75g/km or less) will be eligible for 100% first-year capital allowances to March 31, Leasing companies are ineligible to claim 100% first-year writing down allowance on cars. Instead, they are restricted to 18% (0-130g/km) and 8% (from 131g/km) on a reducing balance basis. As previously announced, it is expected that Budget 2016 will review the case for extending the full-year allowance beyond April 1, 2018, alongside a review of the 130g/km main rate threshold (18%), with any amendments taking effect at the same time. Calculating capital allowances and lease rental restrictions The Government s decision to cut corporation tax to 20% in 2015/16 from 21% in 2014/15 will deliver cash savings to businesses on leased cars and cars bought outright. The corporation tax main rate will remain at 20% in 2016/17. The examples (right) highlight the position for companies in 2015/16 of a car with emissions of g/km and 131g/km, compared with 2014/15. 8

9 Example 1 outright purchase Volkswagen CC: official government fuel consumption figures in mpg (litres per 100km): urban 26.2 (10.8) 53.3 (5.3), extra urban 47.9 (5.9) 68.9 (4.1), combined 36.7 (7.7) 62.8 (4.5). CO2 emissions g/km. This information is based on 2015 Model Year. Since April 1, 2013, leased cars are treated in one of two ways: Cars with emissions of 130g/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 131g/km or more face a 15% restriction, meaning companies can only deduct 85% of any rental payments against their taxable profits. The Government s decision to cut corporation tax from 23% in 2013/14 to 21% in 2014/15, with a further cut to 20% in 2015/16, will deliver cash savings to businesses. Vehicle price: 20,000 CO2 emissions: g/km Writing-down allowance: 18% 2015/16 (2014/15 in brackets) Corporation tax: 20% (2014/15: 21%) Tax relief: 20,000 x 18% x 20% = 720 ( 756) Tax written-down value carried forward: 20,000 x (100-18%) = 16,400 ( 16,400) Example 2 lease Monthly rental: 400 ( 4,800 pa) CO2 emissions: 131g/km or more 2015/16 (2014/15 in brackets) Lease rental restriction: 85% (2014/15: 85%) Corporation tax: 20% (21%) Annual cost deducted against profits: 4,800 x 85% = 4,080 ( 4,080) Tax relief: 4,080 x 20% = 816 ( 857) 9

10 The new Passat - raising the benchmark for fleets The eighth-generation Passat and Passat Estate models are packed with innovations and technology. Bridging the gap between the mainstream upper-medium and luxury saloon and estate markets, the all-new Passat range democratises luxury and is taking the market by storm, having been named Europe s Car of the Year Five trim levels are available S, SE, SE Business, GT and range-topping R-Line and every model features Post-Collision Braking System, Driver Alert System, mis-fuelling prevention device and keyless start as standard. Engines offer exceptional economy and low emissions twinned with great performance, thanks to the incorporation of Volkswagen s BlueMotion Technology modifications, including Start/Stop and battery regeneration systems. The SE Business trim was designed with the company car driver in mind, featuring as standard Front Assist, Adaptive Cruise Control, Pre-Crash system, Driver Profile Selection, ergocomfort seat and front and rear parking sensors. Standard specification is further boosted by Discover Navigation system, 3 years Car-Net Guide and Inform, electric door mirrors, front fog lights and tinted rear glass. The range will be joined in June by a BlueMotion model predicted to return 78mpg on the combined cycle, with CO2 emissions estimated at 95g/km for the saloon and 96g/km for the Estate. An Alltrack version will feature in the Estate line-up from July, bringing extra styling, off-road functionality and four-wheel drive; while a GTE plug-in hybrid model joins the range later in Combining a 1.4-litre 156PS TSI petrol engine and 15PS electric motor, the Passat GTE offers performance and economy; NEDC consumption (for hybrids) is over 141mpg with CO2 emissions lower than 45g/km. New Passat: official Government fuel consumption figures in mpg (litres per 100km); Urban 44.1 (6.4) 65.7 (4.3), extra-urban 61.4 (4.6) 85.6 (3.3), combined 53.3 (5.3) 76.4 (3.7). CO2 emissions g/km. This information includes the new Passat BlueMotion which will be available to order from June

11 Class 1A National Insurance Contributions Employers pay Class 1A National Insurance contributions (NIC) on company cars and fuel at 13.8%. NIC is linked to P11D value and CO2 emissions. As the company car BIK tax table (pages 6-7) highlights, emission thresholds have tightened in 2015/16 and will tighten further in future years. However, the decision to remove the 3% BIK tax surcharge on diesel cars in 2016/17 means companies will benefit from a reduction in Class 1A NIC before payments rise in 2017/18. The only way employers can limit a yearon-year increase in their NIC with the exception of 2016/17 on diesel models is to ensure choice lists feature models with low carbon dioxide emissions. Sample calculations below highlight the impact of the tax changes on NIC. Example 1 Example 2 Volkswagen Polo SE 1.4-litre TDI BMT 75PS 5-door 5-speed manual P11D price: 15,420 CO2 emissions: 93g/km Volkswagen Golf GTD 2.0-litre TDI BMT 184PS 5-door 6-speed manual P11D price: 27,535 CO2 emissions: 112g/km 2015/16 (16% BIK rate) Cash value (P11D x BIK) 15,420 x 16% = 2,467 Employer s Class 1A NIC: 2,467 x 13.8% = /17 (15% BIK rate) 15,420 x 15% = 2,313 Employer s Class 1A NIC: 2,313 x 13.8% = /18 (17% BIK rate) 15,240 x 17% = 2,621 Employer s Class 1A NIC: 2,621 x 13.8% = /16 (20% BIK rate) Cash value (P11D x BIK) 27,535 x 20% = 5,507 Employers Class 1A NIC: 5,507 x 13.8% = /17 (19% BIK rate) 27,535 x 19% = 5,232 Employers Class 1A NIC: 5,232 x 13.8% = /18 (21% BIK rate) 27,535 x 21% = 5,782 Employers Class 1A NIC: 5,782 x 13.8% =

12 Mileage reimbursement rates HM Revenue and Customs Approved Mileage Allowance Payments (AMAPs) set tax and National Insurance-exempted rates for business mileage in a private car. For 2015/16, the rate of reclaim for the first 10,000 miles remains at 45p per mile and 25p per mile thereafter. For the purposes of AMAPs, electric and hybrid cars are treated in the same way as petrol and diesel cars. If the AMAP rate paid to an employee exceeds the approved amount for the tax year, then: For company directors or employees earning 8,500 or more per year, the excess amount should be reported on form P11D for tax purposes. For employees earning less than 8,500, there is no reporting requirement as no tax is payable. 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. In addition to claiming AMAP rates, an allowance for passengers (employees and volunteers) at 5p per mile can also be paid tax and is National Insurance-free. Polo: official government fuel consumption figures in mpg (litres per 100km); Urban 37.2 (7.6) 70.6 (4.0), extra-urban 55.4 (5.1) 91.1 (3.1), combined 47.1 (6.0) 83.1 (3.4). CO2 emissions g/km. This information is based on 2015 Model Year. AMAP rates 2015/16 Up to 10,000 miles Over 10,000 miles All cars 45p 25p 12

13 Employer-provided fuel for private mileage Employees pay BIK tax on fuel for private use paid for by their employer, while their employer 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 2015/16 the figure is 22,100, up from 21,700. This will increase by the rate of inflation in 2016/17. A separate figure applies for vans (see pages 14/15). 2015/16: Calculating your free fuel liability To calculate an employee s BIK liability, you need to know: Combined fuel consumption cycle of your company car and price of fuel used The car s CO2 emissions and the linked BIK tax percentage The marginal tax rate of the driver (20%, 40% or 45%) The Government s fuel benefit charge multiplier ( 22,100) Example 1 the driver s view Volkswagen Passat SE Business 2.0 TDI 150PS BMT 6-speed manual CO2 emissions: 106g/km Fuel economy: 70.6mpg BIK tax: 19% (2015/16) Taxable value (fuel benefit charge multiplier x BIK): 22,100 x 19% = 4,199 Tax charge for a 20% taxpayer: 840 (worth 712 litres of diesel) Breakeven is 11,057 private miles Tax charge for a 40% taxpayer: 1,680 (worth 1,424 litres of diesel) Breakeven is 22,115 private miles Example 2 the employer s view To calculate the annual 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 1.18 per litre): VAT recovery at 20%: ( ) VAT fuel scale charge: Class 1A NIC: Total: 1, Corporation tax at 20%: ( ) Net annual cost to company of providing free fuel: 1,

14 Crafter range: official government fuel consumption figures in mpg (litres per 100km); urban 26.2 (10.8) 35.3 (8.0); extra urban 35.8 (7.9) 42.8 (6.6); combined 31.7 (8.9) 39.8 (7.1). CO2 emissions g/km. Commercial vehicles 2015/16 Company light commercial vehicles used privately incur BIK tax for the driver, based on a taxable value of 3,150 in 2015/16. The charge will increase by the rate of inflation in 2016/17. However, the Government has ended the BIK tax exemption status of electric vans from 2015/16, but the full van benefit charge will not apply until 2020/21. The Government has confirmed its Budget 2014 announcement that the charge will be phased in 20% of the rate paid by conventionally-fuelled vans in 2015/16, followed by 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 rising to 90% in 2019/20, with the rates equalised in 2020/21, when there will be a single benefit charge applying to all vans. The Government says it will review van benefit charge support for zero-emission vans in light of market developments at Budget If free fuel is also provided by the employer for private mileage, an additional van fuel benefit charge applies. The charge for 2015/16 has increased from 581 to 594. It increases by the rate of inflation in 2016/17. 14

15 Class 1A NIC - vans Employer Class 1A NIC for vans are calculated by multiplying the taxable values by 13.8%. Capital allowances/lease rental restrictions Business expenditure on vans (ex-vat) qualifies for tax relief as capital allowances at the rate of 18% a year on a reducing balance basis. There is no balancing charge when a van is sold. The enhanced capital allowance (100%) for zero-emission goods vehicles applies to March 31, 2018, but availability is limited to businesses that do not claim the Government s plug-in van grant. Lease rental restrictions do not apply to vans. VED - vans registered on or after March 1, 2001 There is no change to rates in 2015/16 from 2014/15 Early Euro 4 emission and Euro 5 compliant vans: 140 All other vans: 225 For more information on the Volkswagen Commercial Vehicle range telephone or visit FSC logo here 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, May 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 passenger car range or to request a test drive, call the Fleet Business Centre on or visit For the latest news from Volkswagen Fleet follow us on 15

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