All change for car benefit
All change for car benefit
By Robert Harris
FARM businesses should review their motor vehicle policy now to avoid losing out when the government adjusts the car benefit regime in April 2002.
After that date, the taxable benefit will be determined by a cars carbon dioxide emissions and whether the car is diesel-powered, says Clive Buckland, senior agricultural consultant with accountant Grant Thornton.
"For cars with CO2 emissions of 165g/km or less, the benefit will be 15% of the list price. This increases 1% for every 5g/km up to a maximum of 35%. In addition, if the car is diesel-driven, there is an automatic 3% supplement up to the overall cap of 35%."
The biggest losers under the new regime are likely to be high mileage drivers and they may be better off acquiring their own cars and being reimbursed, he adds.
In most cases, farming companies and their employees are likely to make the biggest gains (see table). In this example, a Land Rover Discovery 2.5TD with a list price of £24,495 and a CO2 emission rate of 248g/km travels 12,000 miles/year, two-thirds of them as business miles.
If the car were owned by the company, it would cost that firm £7335 and the employee £4769, a total of £12,124. But transferring ownership to the individual would almost halve the total cost. "Any farm business would be glad of a £6000 saving," says Mr Buckland.
Correct decision
Under the new regime, a partnership would make no gain. "You would probably want to keep the car in the business," says Mr Buckland.
The correct decision will depend on the cost and emission rate of the car, the amount of business and private mileage, tax rates and the VAT position, he adds. "But, where new cars are being purchased now, businesses should evaluate the changes. They should consider transferring car ownership to the individual on Apr 6, 2002. The wrong policy could be a costly option." *
Dont get caught out by next years changes to the car benefit regime.
What a Land Rover Discovery 2.5TD costs*
Cost to the business Cost to you Total cost
Company
Owned by company £7355 £4769 £12,124
Owned personally £2560 £3800 £6360
Partnership/sole trader
Owned by partnership £5526 – £5526
Owned personally £1920 £3800 £5720
* Assumes 12,000 miles/yr (8000 business, 4000 private), average annual running costs and company tax at 20% and an individual and partnership tax rate of 40%.