insideKENT Magazine Issue 82 - January 2019 | Page 141
BUSINESS
When is a
benefit
not a benefit?
by Rick Schofield, partner at Wilkins Kennedy Ashford
THE IDEA OF BEING PROVIDED WITH A BRAND NEW CAR, COURTESY
OF A COMPANY, WITH NO INITIAL COSTS OR MAINTENANCE TO WORRY
ABOUT WOULD SEEM LIKE A NO-BRAINER. HOWEVER, YOU COULD BE
PAYING MORE THAN YOU THINK.
A company car provided to an individual, which
can also be used for private mileage, is considered
by HMRC to be a Benefit in Kind (BIK). As
such, the car and its associated costs will be
subject to a tax charge, based on the CO2
emissions produced by the vehicle and the list
price. VAT and delivery should be included in
that list price, as well as any accessories that
have been added.
The CO2 emissions determine a percentage
based on whether a vehicle is considered to have
high or low emissions. This ranges from 13%
for 2018/19 up to a maximum of 37% – so the
lower the emissions, the lower the percentage.
Whilst diesels emit lower levels of CO2, they
can emit higher levels of other pollutants such
as nitrous oxide which has led to an introduction
of a diesel surcharge of 3%.
The list price is then multiplied by this percentage
to ascertain the BIK value. In order to determine
how much tax you’ll pay, simply multiply
the BIK value by your tax rate of either
basic rate (20%), higher rate (40%) or additional
rate (45%).
Why would a company car benefit me?
In addition to the tax due on the benefit of the
car itself, if your employer pays for the fuel and
permits you to use this for private mileage,
there’ll be an additional tax charge. This
is calculated using a fixed sum of £23,400 (for
2018/19) and multiplying the same percentage
figure as determined by the CO2 emissions
in the car benefit calculation. This can
prove expensive if you don’t clock up many
private miles.
Based on fuel costs set down in HMRC’s Fuel
Advisory Rates (June 2018), a higher rate tax
payer would need to drive on average over
19,000 private miles before it became cost
effective to have company provided fuel. This
would be in a mid-range, mid-market car, such
as a Ford Focus. If you drive a more executive
car, such as an Audi, you might find you need
to drive a whopping 26,300 miles to make it
worthwhile.
So unless you use your company car for a lot of
private miles, it may be worth making sure you
make good any private mileage costs using
HMRC’s Fuel Advisory Rates. Of course, an
accurate mileage log would need to be kept to
evidence this.
When is a benefit not a benefit? When it costs you more
than it’s worth. If you’re offered a company car or your
current car is up for renewal, it’s definitely worth doing your
sums to make sure it makes financial sense, especially giving
consideration to the rate increases already in place
for next few years. Contact Wilkins Kennedy’s offices in
Ashford, Canterbury, Maidstone, Orpington and Sandwich
for more information.
Local offices:
Ashford: 01233 629 255 / Canterbury: 01227 454 861
Maidstone: 01622 690 666 / Orpington: 01689 827 505
Sandwich: 01304 249 997
What are the options?
1. Change to an Ultra Low Emission Vehicle
(ULEV) – Cars that are entirely electric attract
a mere 2% rate.
2. Use your own vehicle if you don’t travel many
miles for business. If you drive your own vehicle
for business purpose, HMRC permit
reimbursement at 45p per mile without a charge
to tax for the first 10,000 business miles per year.
3. Take a cash allowance – although cash
payments will be subjected to tax and NI through
the payroll so the amount your employer agrees
to pay will be reduced by these deductions but
it may still be a viable option.
[email protected]
www.wilkinskennedy.com
wilkinskennedy
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