Steven Mugglestone

The more I learn, the less I know

Consider The Green Car or Bike Options to Save Tax

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Consider The Green Car or Bike Options to Save Tax

In the current economic environment, the focus of most employers is increasingly on reducing costs and to provide maximum value to their employees for minimum spend.

As a consequence, Green Cars and the associated tax breaks remain firmly on the reward agenda and companies are reconsidering the way that they make purchasing/leasing decisions, how they provide cars and what categories of worker will have the opportunity to have a company car and in recent years the provision of a company bike.

Since the company car tax rules were changed in April 2009, the tax relief available to businesses has been based on CO2 emissions.  This means that cars with emissions that do not exceed 110g/km or are electric can currently qualify for a 100% first-year allowance and those with less than 160g/km emissions attract a 20% capital allowance rate.

Car manufacturers are increasingly introducing vehicles including hybrid cars with lower CO2 emissions as demand for Green Cars increases and now there is are a variety of executive and even prestige cars which have emissions under 110g/km.

In addition to these savings, there is a growing trend towards the introduction of salary sacrifice for company cars, with many businesses not restricting take-up to the traditional ‘perk’ or ‘essential user’ categories.  Instead, there is a move towards offering cars to the wider workforce with the following advantages:

Employees: make tax savings by sacrificing salary taxed at 32% (tax and NIC for a basic rate payer) in return for a car with emissions below 110g/km and pay tax on only 10% of the list price.  This makes driving a new car affordable for all staff who are able to sacrifice salary and the option is there for employees to take a 2nd or even a 3rd car for their spouse or university aged and over children, where the Employer’s scheme permits.  In addition, cars with lower CO2 emissions generally use less fuel which means less fuel cost, thus generating further savings.

Employers: benefit from volume discounts, can recover some VAT and save on NIC costs.  There is also the corporate responsibility benefit of knowing that your employees are driving roadworthy vehicles and that your own Green Agenda is being met.

It is, however, worth keeping a note on the VAT issues in respect of salary sacrifice, including the recent announcements made by HMRC at:

http://www.hmrc.gov.uk/briefs/vat/brief3611.htm

Use of bikes

The provision of tax free company pool bicycles or loans of bikes is also proving to be popular. Full details of the HMRC rules for bikes can be found at:

http://www.hmrc.gov.uk/manuals/eimanual/eim21664.htm

Organisations such as Cyclescheme, http://www.cyclescheme.co.uk/ have also become more and more popular in the provision of individual bikes to employees and administering this for businesses and employees.  Savings of around 40% are common, utilising this scheme.  To check the easiest way to do this, go to:  http://www.cyclescheme.co.uk/get-a-bike

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

http://uk.linkedin.com/in/stevenmugglestonefca/
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http://www.mcgregorscorporate.co.uk/

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steven@mcgregorsbirmingham.co.uk

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Written by Steven Mugglestone

December 5, 2011 at 11:06 am

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