• For Businesses
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Following changes in this year’s Budget, leading accountant and business adviser Baker Tilly is urging companies to consider seriously what type of car they allow their employees to drive as the increased cost of higheremission cars is starting to hit home.

Until now, companies paid little attention to the CO2 emissions of cars but, given that employers’ NICs are based on the drivers’ benefit in kind charge, which is in turn based on the CO2 emissions of the car, it follows that the higher the car’s CO2 emissions the higher the NI cost to the company. The difference in the NI bill can be hundreds of pounds and, across a fleet of vehicles, the cost of ignoring this charge will have a huge impact.

The Government needs to bring CO2 emissions down further and changes the measures that came into effect in April 2008 include:

• Cars with CO2 emissions up to 110g/km – 100% capital allowances, no restriction on leasing charges and minimal road tax.
• Cars with CO2 emissions from 111g/km to 150g/km - 20% capital allowances and reduced rates of vehicle tax.
• Cars with CO2 emissions over 225g/km - 20% capital allowances and £400 vehicle tax.

This range of measures is clearly trying to encourage employers to consider carefully before choosing cars with CO2 emissions above 150g/km (and particularly those with CO2 emissions above 225g/km). This remains a complex area but careful tax planning can maximise the tax and NIC savings that are available whilst continuing to meet the needs of the business with the cars that are acquired.

Apart from the restrictions on corporation tax relief, the higher vehicle excise duty will mean that such cars will lose a significant amount from their resale value, as buyers in the secondhand market will be less willing, and less able, to pay the high road tax.