Taxation on vehicles can often be a deciding factor for many smaller businesses when they are choosing their fleet cars as this can be a hefty price to pay. In general the more environmentally friendly the car is the less tax you will have to pay, but this can often mean opting for more costly models.
Company Car tax calculation
Company car tax is calculated by the cars P11D value, which is based on the list price, including VAT and delivery costs plus any added extras. A vehicle’s first registration fee and Vehicle Excise Duty are not included in this cost and will need to be paid in addition.
Benefit in kind taxation
Your employees with a company car have to pay Benefit-In-Kind taxation on their fleet cars which is calculated by taking a percentage value of the car’s P11D, which is determined by emissions level. This is then multiplied by the driver’s income tax rate. So the cheaper and less emissions your company cars have the less cost in turn to your drivers. This is something for businesses to consider as there will be a tipping point when it is no longer worthwhile to have a company car.
Fleet owners should also think about the amount of National Insurance that you are required to pay on your vehicles. When employees are able to use their company car privately the fleet cars are also eligible for National Insurance. Once again these payments are also determined by the P11D value and CO2 emissions.
Companies can however, claim capital allowance on equipment they use for business, and so if your cars release under 96g/km of CO2 then you can claim for a 100% first-year-write-down.
Vehicle Excise Duty
In addition to company car tax, Vehicle Excise Duty (road tax), is equally required and emissions-based with cars being grouped into bands dictating how much tax is required on each. Anything below 130g/km CO2 emissions are exempt of VED to align with the government targets to reduce emissions. There is also a separate Excise Duty charge for the first registration year with vehicles below 130g/km once again being exempt.
What you need to know following the elimination of the tax disc
Following the recent abolition of the tax disc in October there are a few other things that fleet owners need to know about VED. Firstly there will no longer be a grace period which was acceptable whilst waiting for your tax disc in the post, and fleets will need to tax a vehicle as soon as it expires. Failure to tax your fleet vehicles will result in a £1,000 penalty.
As a fleet owner your employees may wish for confirmation that their road tax has been paid. Whilst there will be no physical tax disc displayed, you are able to re-assure your drivers that tax has been paid on vehicles by online checks where they can input the make and registration of their vehicle to receive confirmation.
In terms of payment you are able to pay VED via direct debit and whilst there won’t be a charge to pay annually, the DVLA will impose a 5% surcharge if fleets choose to pay on a bi-annual or monthly basis. This is something worth considering as for a large fleet this surcharge will soon add up.
Fleets will also be no longer able to sell vehicles and transfer the tax remaining on the car to the new owner. The new owner will be responsible for taxing the car. As a Fleet owner you will automatically receive a refund on the tax remaining from the DVLA once the paperwork goes through.
Adopting a green fleet approach saves on fleet insurance as well as tax
As well as making savings on fuel and road tax costs, you can also benefit from cheaper fleet insurance deals by adopting a fleet of green cars. Some insurers will offer lower fleet insurance premiums to environmentally friendly car owners. It is worth checking with a specialist fleet insurance broker to find out what savings you can make in this area.
Ultra-low emission zone charge
Boris Johnson is even set to introduce the world’s first ultra-low emission zone (ULEZ) to improve London’s air quality and reduce NO2. This move, due to be in place by 2020, is set to charge motorists a minimum of £23 to travel into central London. By 2018 all taxis and private hire vehicles will need to be capable of zero emissions if they want to secure a licence to operate in London.
This move will ultimately affect businesses and their policies for driving around the city and choice of fleet vehicles moving forward.
If you have any questions about fleet cars please comment below.
Images: ”DENVER, CO, USA – JUNE 10, 2013: Cars in a parking lot at Denver airport. In 2013, Denver was the 5th busiest airport in the US and the 15th in the world with more than 52 million passengers./ Shutterstock.com“
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