TAX CHANGES 2013/14: The tax man cometh
26 March 2013
It's a case of give and take for fleets when the new taxation laws come into force from April. Jack Carfrae details the changes and explores how businesses can prepare themselves.
It's the same story every April. The new financial year kicks in, the Government's tax boundaries shift and business car operators suddenly find they're out of pocket.
The tax man has never been popular, but to the Government's credit, it publishes the legislation well in advance, so businesses always have the opportunity to ready themselves for any changes - and either soften or avoid them - if they're switched on.
With the hour of a new financial year almost upon us, it's high time fleets prepared themselves for the changes that are about to come.
The good news, for drivers at least, is that benefit-in-kind isn't going to see much of a hike. Last year's taxation changes marked something of a blow for businesses, and employees in particular, as the removal of the qualifying low-emissions car threshold (QUALEC) pulled the rug from under a lot of core fleet models. Its absence meant they could no longer cash-in on sympathetic BIK rates for vehicles in the 99-120g/km bracket, leading to anything up to a 5% BIK band rise.
This year, there is a slight increase in cash going to HMRC's coffers, but it's hardly enough to worry about, as Simon Down, senior manager at Deloitte's car consulting team, explains: "For company car tax there may not be a really noticeable change. If you've got a £25,000 car and you're a 40% tax payer, you may be paying another £5 or £10 a month. That isn't a tremendous cost increase; however, it is set to continue rising."Writing down
It's a different story for employers and leasing companies in 2013/2014, though. The biggest and potentially the most costly change is the new writing-down allowance.
Ian Hughes, commercial director at leasing firm Zenith, details the shift: "The only game in town is the change to capital allowances. [the first-year allowance] is being reduced from 110g/km to 95g/km. There are now two new bandings - high and low - 130-160g/km and 130g/km and below. That's the new universe."
This means that as of April the first-year allowances for car purchases will drop from 110g/km to 95g/km, vastly reducing the number of available models that qualify for them.
"Cars of 131g/km and above will typically increase on their monthly rental by around £12.50 per month," continues Hughes. "Those emitting 111-130g/km will be unaffected, which is good news. Cars emitting 110g/km or less are also going up by approximately £11.50."
April also heralds the end for the 160g/km emissions limit adhered to by many fleets, which until now, allowed them to take advantage of the full 18% writing-down allowance. That will only be applicable to cars emitting 130g/km or less. Those emitting more than 130g/km will only be eligible for an 8% writing-down allowance.