Pre-Budget Report: Company Cars, Fuel and Electric Cars and Vans

Advance warning has been given of an adjustment to the basis on which company car benefit charges are calculated so that, from 6th April 2012, a higher proportion of the car’s value will be taken into the calculation. This is in line with other changes in the years leading up to 2012/13 which make company cars progressively more expensive for the employee and employer each year.

Also, the figure taken into account for the car fuel benefit calculation has increased from £16,900 to £18,000 so the benefit from company-provided fuel will increase from 6th April 2010. There is also an increase in the benefit charge from £500 to £550 applicable to private fuel provided employees with company vans.

There is a new 10% band for company cars with emissions of up to 99g/km which means that only a tenth of the car’s value will be treated as a benefit in kind.

There are further measures that apply to cars and vans that are propelled solely by electricity which will apply for five years from 6th April 2010. For these cars and vans there will be no benefit arising and no Class 1A National Insurance liability for the employers.

Comment: The increase in the benefit-in-kind charge for company cars and fuel was expected and reinforces the need continually to assess the cost effectiveness of providing employees with company cars. The measures announced for low emissions and electric cars are welcomed but are possibly of only limited application as very few cars fall into these categories.