Business Tax Tip 9 – Are you getting the tax right on company cars?

Have you told the Taxman about any changes to your company cars or who uses them?

Tip: Changes to company cars can be reported on form P46 (car) or online and can save employees from paying the wrong amount of tax in the year and receiving a large tax bill later.

If you provide company cars, have you checked in the last year whether you and your employees could be better off by changing your company car and petrol policy?

Tip: The last few years have seen dramatic changes to the way company cars are taxed. Inevitably, the tax on most types of cars is now higher – especially for cars with high CO2 emissions.

If your employees use their own cars for company business, do you know how the mileage rules affect them and the business?

Tip: Employers are able to pay employees up to 45p per business mile tax free, dropping to 25p per business mile after 10,000 business miles for using their cars on business journeys. Where employees receive less than these limits for business journeys in their own cars they can claim the difference as a deduction against their wages and reduce their tax bill.

Have you considered providing your employees with new low emission cars?

Tip: The tax paid by employees on low emission cars is now less than on high emission cars, and you can also claim 100% tax relief when you buy certain low emission cars. Note: This 100% relief is much more generous than the normal capital allowances on standard and high emission cars. It is surprising what cars are now included. A list can be found at

Are you utilising the rules for employees taking home company vans?

Tip: From 6 April 2007, unrestricted private use will generate a benefit in kind chargeable to tax of £3,000 per annum, with an additional £550 chargeable if fuel is also provided. Carefully documented procedures restricting private use could avoid this tax. Remember that the definition of ‘van’ may include pick-up trucks.

Any questions?

If you would like to arrange a free meeting with a Liverpool accountant to discuss business tax, either at our office or at your premises, please contact us on 0151 724 3960 or by email at [email protected].

Alternatively, you can use our website contact form.

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Added by Jon Davies

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