Tuesday, March 18, 2008

Company van drivers will not be taxed on fuel reimbursements under a new law being introduced in the finance bill.

The rule affects employees who have a company van for private use but purchase fuel for business travel that is paid for by employers, as well as employers who bear class 1A National Insurance on the taxable benefit of providing both the vehicle and fuel.

It falls in line with the provisions for company car use and will take effect when this year's finance bill receives royal ascent.

The chancellor also announced the reform of car vehicle exercise duty (VED) and write-down allowances with benefits for corporate car owners.

On top of a delay until October of the expected increase of two pence per litre to fuel duty rates, other news for companies was that government will further promote the take up of cleaner cars through reforms to the taxation of business travel.

Darling is replacing the existing capital allowance treatment for business cars with an emissions-based approach in April 2009. Seen as part of his tactic on reducing carbon emissions, the new system will benefit both individual and corporate car users as it provides benefits for vehicles with lower emissions.

Darling said that cars and vans make up 22% of UK vehicle emissions and the new rules would provide an incentive to buyers to purchase more efficient cars and create an incentive for manufacturers to make them.

With effect from 1 April 2009 VED for cars, registered on or after 1 March 2001, will be reformed to include six new bands. At the same time for corporation tax purposes the capital allowance treatment of all cars will be reformed. Expenditure on cars with CO2 emissions above 160g/km will attract a 10% writing down allowance (WDA) and expenditure on cars with CO2 emissions of 160g/km or below will attract 20% WDA.

However the structure of the allowances will change each year up until March 2013, and company car tax will increase on all but the cleanest cars emitting less than 135g CO2/km 2010-11. In addition to this, the 100% first year allowances (FYA) for the cleanest cars will be extended from March 2008 to March 2013 when the qualifying CO2 emissions threshold will be reduced to 110g/km.

Source: http://www.accountingweb.co.uk/