Tax changes to hit new company cars

Businesses running company cars were warned this week to review their operations to avoid being hit by revised tax regulations next year.

The treatment of car expenditure for tax relief purposes is based on CO2 emissions and from next April special 100 per cent first year allowances will only be available on new cars where emissions do not exceed 95 gm/km CO2 instead of the present 110.

Also from next April, the CO2 threshold for a main rate pool car attracting the 18 per cent WDA (Writing Down Allowance) will be reduced from 160 to 130.

Brian Gooch, tax manager at Sheffield-based Hawsons, independent chartered accountants and specialist business advisers, said: “The reductions, which are being made to assist in reaching EU emission targets for 2020, will certainly have a detrimental effect on tax relief but businesses can help themselves by making purchases of cars before the new regulations apply in April 2013 or, after that, buying cars that meet the reduced CO2 emission levels.

“The range of cars available at these lower emission thresholds continues to grow, and the taxable charge for an employee driving a company car with lower emissions is also reduced.”

Another option, he added, would be to consider leasing alternatives for higher emission cars because 85 per cent of the cost can be deducted for tax.