Tax and Travel – Budget Report 20 March 2014
Tax and Travel
Car and fuel benefits
The taxable petrol and diesel car benefit is based on the car’s CO2 emissions. It is calculated using the car’s UK list price and applying the ‘appropriate percentage’ as shown in the table on the right. The car fuel benefit is calculated by applying the same percentages to the fuel benefit charge multiplier, which for 2014/15 is £21,700.
For cars which cannot produce CO2 engine emissions under any circumstances when driven (‘zero emission cars’, including those powered solely by electricity), the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil. For cars emitting between 1g/km and 75g/km the appropriate percentage is reduced to 5% (8% for diesel) for five years from 6 April 2010.
The lower threshold will be reduced from 115g/km to 110g/km with effect from April 2014. The lowest appropriate percentages will remain at 0% and 5%. The appropriate percentage will increase by 1% for all vehicles with CO2 emissions between 95g/km and 210g/km, to a maximum of 35%.
From April 2015, there will be two new appropriate percentage bands for company cars emitting 0-50g/km CO2 (5%) and 51-75g/km CO2 (9%). The remaining appropriate percentages are increased by 2% for cars emitting more than 75g/km CO2 to a new maximum of 37%.
From April 2016, all the appropriate percentages are increased by 2% up to the maximum of 37%. The diesel supplement will be removed, so that diesel cars will be subject to the same level of tax as petrol cars.
VAT on fuel for private use in cars
Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use the flat rate valuation charge. The table below shows the VAT chargeable for quarters commencing on or after 1 May 2014.
|CO2 emissions||Appropriate percentage||Quarterly VAT|
|(g/km)||Petrol%||Diesel%||Fuel scale charge £||VAT on charge
|Up to 75||5||8|
|95 – 99||12||15|
|100 – 104||13||16|
|105 – 109||14||17|
|110 – 114||15||18|
|115 – 119||16||19|
|120 – 124||17||20|
|125 – 129||18||21||234||39.00|
|130 – 134||19||22||251||41.83|
|135 – 139||20||23||266||44.33|
|140 – 144||21||24||282||47.00|
|145 – 149||22||25||297||59.50|
|150 – 154||23||26||313||52.17|
|155 – 159||24||27||328||54.67|
|160 – 164||25||28||345||57.50|
|165 – 169||26||29||360||60.00|
|170 – 174||27||30||376||62.67|
|175 – 179||28||31||391||65.17|
|180 – 184||29||32||408||68.00|
|185 – 189||30||33||423||70.50|
|190 – 194||31||34||439||73.17|
|195 – 199||32||35||454||75.67|
|200 – 204||33||470||78.33|
|205 – 209||34||485||80.83|
|210 – 214||35||502||83.67|
|215 – 219||517||86.17|
|220 – 2224||533||88.83|
|225 and above||548||91.33|
Motorists (private or business) purchasing new qualifying ultra-low emission cars can receive a grant of 25% towards the cost of the vehicle, up to a maximum of £5,000. The scheme also covers new qualifying ultra-low emission vans, where the available grant will be 20% towards the cost of the vehicle, up to a maximum of £8,000. Vehicles with CO2 emissions of 75g/km or less, including electric, plug-in hybrid and hydrogen-fuelled cars, are all potentially eligible for the subsidy. There are strict criteria to be met before specific vehicles can be confirmed as eligible under the rules of the scheme.
Changes to the HMRC business mileage rates are announced from time to time. The rates from 1 March 2014 are as follows:
|Vehicle||First 10,000 miles||Thereafter|
|Car / Van||45p||25p|
|Car – fuel only advisory rates|
|1400cc or less||14p||12p||9p|
|1401cc – 1600cc||16p||12p||11p|
|1601cc – 2000cc||16p||14p||11p|
The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.
HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.
Car costs – Vehicle Excise Duty (VED) rates
VED (‘Car Tax’) rates also reflect emissions, with lower scale rates for cars using alternative fuels. The following table shows the rates which apply from 1 April 2014 for cars registered on or after 1 March 2001:
|VED Band||CO2 emissions (g/km)||First year rate||Standard rate|
|Petrol & Diesel||Alternative fuels|
|A||Up to 100||£0||£0||£0|
|* includes cars emitting over 225g/km registered before 23 March 2006|
The taxable benefit for the unrestricted private use of vans is £3,090. There is a further £581 taxable benefit if the employer provides fuel for private travel.
|Van and fuel charge||Van||Fuel||Total|
|Tax (20% taxpayer)||£618||£116.20||£734.20|
|Tax (40% taxpayer)||£1,236||£232.40||£1,468.40|
|Tax (45% taxpayer)||£1,390.50||£261.45||£1,651.95|
|Employer’s Class 1A NICs||£426.42||£80.18||£506.60|
The flat rate of £3,090 is reduced to nil for vans emitting zero CO2. There is no fuel benefit for such vans.
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