Company Car Tax help

DiscoKandy · 11 Jul 2012 at 16:57

My brother has been working as a surveyor in a fairly junior position for the last couple of years for a relatively small company.

His salary is fairly low (20% tax band) and the company has been struggling the last few years, in an attempt to try and retain him they have offered him a smallish pay rise, but also the offer of a 'company car' as a sweetner.

The car is the MD's old car which he's about to have replaced, he's unsure however that after paying the company car tax its actually an offer that makes any sense taking up. I've tried to help him make sense of the company car tax rules/calculators, but am struggling to make sense of it.

The car is a 2006 BMW 320Si Petrol, the terms of the deal mean all servicing and maintaince of the car will be paid for and he just has to pay the tax.

Approximately, how much would he have to pay monthly ?

rodenal · 11 Jul 2012 at 17:27

If you go onto the HMRC site and stick a few details in you'll get an indication.

What kind of distance does he live from work and does the car include private fuel? When I was still a QS and got my first co car it was a god send as I had been spending a fair sum just getting to work (central office) each day before going to site. Despite the negative deduction in tax I came out financially benefitted overall

edit had a quick look and it could be as much as about £260 per month of a hit assuming he has a fuel card and private fuel paid you could take £100 off that if there's no fuel benefit - I guess it depends on the current spend (non reclaimable) related to his car. If the car was a diesel or just anythign with reasonable co2 those numbers would be quite a bit lower.

I'm sure I used to pay in the region of 140 /150 net per month for a 2.0tdci focus for example

wassap · 11 Jul 2012 at 17:44

Blimey, my new A4 Avant, will only cost me £200pm INC private fuel benefit,and a load of options on the car.

[TW]Fox · 11 Jul 2012 at 17:52

This is a very difficult one to appraise. People will now tell you how much tax they pay on a new car and this will make the offer look poor.

But of course thats because the company is paying for the rest of the cost associated with these peoples car. Your brothers company cannot afford to do this so has offered a car they already have. So, the car is free, but the tax to use it isn't.

Therefore people saying 'I only pay £x per month for a brand new A4' is a bit like people saying 'I only pay £30 road tax for a brand new 320d, you pay £200 for a 10 year old A4'. True, but frankly irrelevent.

Now, if he is being offered a car allowance as an alternative the company car makes no sense but I'd imagine if the option is a car they already have there won't be an alternative allowance.

As a basic rate taxpayer then he will pay £136 a month in tax to have this car.

Everyone will now bleat this is a terrible deal - and, compared to most company cars, it is more expensive. A brand new 320d would cost him half that.

But the offer a brand new 320d isnt there. Neither is the offer of a car allowance. It's this or nothing.

And in isolation a 2006 BMW 320Si for £136 a month inclusive of all tyres, servicing, repair costs, road tax, etc etc, is objectively quite a good deal.

You couldn't buy and run your own 320Si on an 06 plate for £136 including the cost of depreciation, servicing, repair bills, tyres etc.

rodenal · 11 Jul 2012 at 18:12

Fox that looks like the car only sum, if so and there is a fuel benefit attached the monthly sum will be significantly higher - though I agree with the sentiment and in reality the fuel may eveb sweeten the deal

[TW]Fox · 11 Jul 2012 at 18:14

rodenal said:
Fox that looks like the car only sum, if so and there is a fuel benefit attached the monthly sum will be significantly higher - though I agree with the sentiment and in reality the fuel may eveb sweeten the deal

I would be amazed if there was a fuel benefit as well - but he doesn't NEED to take the fuel benefit as well even if there is one.

This sounds like a small company who wants to do him a favour but can't neccesarily afford to rush out and lease him a brand new car.

rodenal · 11 Jul 2012 at 18:18

If he is a qs then even the smallest companies tend to run a fuel card system due to the amount of travel both the office staff and vans (if its a main/ sub contractor) do. You're right though in that he doesn't need to take it, if its a small company there is also the chance that they will *cough* allow the occasional use of one

wassap · 11 Jul 2012 at 18:23

[TW]Fox;22324740 said:
This is a very difficult one to appraise. People will now tell you how much tax they pay on a new car and this will make the offer look poor.

But of course thats because the company is paying for the rest of the cost associated with these peoples car. Your brothers company cannot afford to do this so has offered a car they already have. So, the car is free, but the tax to use it isn't.

Therefore people saying 'I only pay £x per month for a brand new A4' is a bit like people saying 'I only pay £30 road tax for a brand new 320d, you pay £200 for a 10 year old A4'. True, but frankly irrelevent.

Now, if he is being offered a car allowance as an alternative the company car makes no sense but I'd imagine if the option is a car they already have there won't be an alternative allowance.

As a basic rate taxpayer then he will pay £136 a month in tax to have this car.

Everyone will now bleat this is a terrible deal - and, compared to most company cars, it is more expensive. A brand new 320d would cost him half that.

But the offer a brand new 320d isnt there. Neither is the offer of a car allowance. It's this or nothing.

And in isolation a 2006 BMW 320Si for £136 a month inclusive of all tyres, servicing, repair costs, road tax, etc etc, is objectively quite a good deal.

You couldn't buy and run your own 320Si on an 06 plate for £136 including the cost of depreciation, servicing, repair bills, tyres etc.

Sorry my comment aimed more at how much rodenal was paying for a Focus.

I agree, £136 pm for a decentish car is pretty darn good, and depending on how many private miles he does, then it may be worth taking the fuel option too.

rodenal · 11 Jul 2012 at 18:29

wohoo said:
Sorry my comment aimed more at how much rodenal was paying for a Focus.

I agree, £136 pm for a decentish car is pretty darn good, and depending on how many private miles he does, then it may be worth taking the fuel option too.

List price was something daft for a focus which didn't help, 21.5k from memory plus id expect your A4 to have lower emissions

DiscoKandy · 12 Jul 2012 at 11:16

Thanks for the replies chaps, solid advice.

It's the age of the car and the effect on the tax payable that was throwing me, I didn't realise it was on a sliding scale as the car got older and wasn't just based on its original list price & emmissions.

There is no alternative for a car allowance. Fuel allowance for company travel is 15p a mile though, which at around £1.30 a litre works out around 40mpg! I don't think he has the option for taking up the "fuel tax option".

Presently he's using a mk1 focus pool car for company travel and all fuel is covered, I assume once he takes the company car, the use of the pool car goes away, in which case it might leave him out of pocket if he's doing lots of work travel...

Thanks for the replies

Ev0 · 12 Jul 2012 at 11:34

DiscoKandy said:
It's the age of the car and the effect on the tax payable that was throwing me, I didn't realise it was on a sliding scale as the car got older and wasn't just based on its original list price & emmissions.

Is it on a sliding scale though? I didn't think it was but I could very well be wrong.

rodenal · 12 Jul 2012 at 11:41

No, it's based on list price and CO2

[TW]Fox · 12 Jul 2012 at 11:59

DiscoKandy said:
I didn't realise it was on a sliding scale as the car got older

It's not.

and wasn't just based on its original list price & emmissions.

It is.

DiscoKandy · 12 Jul 2012 at 12:00

oh right, so if a 320Si was could still be bought today brand new at the same list price, the company car tax payable by the employee would be exactly the same ?

Edit: I see...

[TW]Fox · 12 Jul 2012 at 12:04

DiscoKandy said:
oh right, so if a 320Si was could still be bought today brand new at the same list price, the company car tax payable by the employee would be exactly the same ?

Correct (Well, other than the fact the newer versions have lower emissions and thus lower tax).

Windle · 12 Jul 2012 at 13:26

DiscoKandy said:
Thanks for the replies chaps, solid advice.

It's the age of the car and the effect on the tax payable that was throwing me, I didn't realise it was on a sliding scale as the car got older and wasn't just based on its original list price & emmissions.

There is no alternative for a car allowance. Fuel allowance for company travel is 15p a mile though, which at around £1.30 a litre works out around 40mpg! I don't think he has the option for taking up the "fuel tax option".

Presently he's using a mk1 focus pool car for company travel and all fuel is covered, I assume once he takes the company car, the use of the pool car goes away, in which case it might leave him out of pocket if he's doing lots of work travel...

Thanks for the replies

That's a very poor rate for business mileage fuel, most are significantly higher (40p per mile) for the first xx miles then it drops to a lower rate.

rodenal · 12 Jul 2012 at 13:41

Windle said:
That's a very poor rate for business mileage fuel, most are significantly higher (40p per mile) for the first xx miles then it drops to a lower rate.

45/25p is the rate for non company car users. Company/pool car users are normally paid around 16ppm and can claim tax relief on the rest at tax year end.

That normally works out fine as the co car is inevitably diesel - little bit different in this situation though

Ev0 · 12 Jul 2012 at 13:42

It seems to be around the norm for a non private use mileage charge, my place is 15p for diesel, 18p for petrol a mile if you receive company funding for a vehicle (don't have to use it on a car though).

Bear in mind if you can claim the tax back on the difference between what's paid to you and the HMRC recommended/allowed rates. (is this just if you use your own car or can you still claim this difference back regardless of if it's a company car or personally owned/run?).

Windle · 12 Jul 2012 at 14:32

rodenal said:
45/25p is the rate for non company car users. Company/pool car users are normally paid around 16ppm and can claim tax relief on the rest at tax year end.

That normally works out fine as the co car is inevitably diesel - little bit different in this situation though

Ah didn't know there was a distinction to be honest as all the company cars here get a fuel card and simply pay a private mileage contribution.