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ON THE MONEY: From next April the magic figure is 160

Date: 12 November 2008

Rupert Saunders

Forward thinking businesses are already changing their car policies and ordering cars below the 160g/km CO2 capital allowance cut-off figure, writes Rupert Saunders

It's still not entirely clear how the Government intends to implement the changes to capital allowances that are due to take effect from next April.

But forward thinking businesses are already changing their car policy - and you should be among them.

The tax change is one of the reasons why Ford is launching a two-wheel drive version of the Kuga. Getting rid of the 4WD differential, with all its weight and drag on the engine, will bring the SUV in under the magic 160g/km CO2 emissions figure.

Roelant de Waard, Ford chairman, told me over a recent dinner: "Although the Kuga is not primarily a fleet vehicle we need to get it onto choice lists and to attract the user-chooser.

"We are beginning to see some companies draw a line at the 160 level. They will not now consider a car above that. It is a decision being made for them in the finance department."

In case you have missed the relevance of the proposed changes, here's a quick summary. From next April, companies will be able to write-down the asset value of cars emitting under 161gm/km at 20% a year; cars above 160gm/km will only be able to be written down at the rate of 10% a year.

This may seem a technical change but it will have a significant effect on how much tax your company pays on its profit (corporation tax). Ignore it at your peril.

It is true that some aspects of the change are not yet announced and the business car industry would like to see clarity on any transitional arrangements, basically affecting cars bought or leased before April 2009.

John Lewis, BVRLA director general, said: "The Government must use the forthcoming Pre-Budget Report to clear up all remaining uncertainty surrounding the corporation tax review. We need clear guidance that will enable businesses to plan their vehicle funding and acquisition strategy in confidence."

But, the bottom line here is blindingly simple: these changes are going to happen from next April. The question of whether or not there will be a transition period is largely irrelevant from an operational point of view. It is much simpler (and more cost effective) to take account of them now, rather than hang on in the hope of slipping some thirsty petrol gas-guzzler in under the radar on 31 March.

And as Ford's de Waard pointed out, it's not as if putting drivers into cars below this level is going to be a significant penalty. Most of his Focus models and nearly all Mondeo diesels come in under that limit - most mainstream business car providers achieve it too.

So, unless you are prepared to accept the financial penalty, I suggest any car ordered for your business from this day forward should be under the 160g/km cut-off. Take a close look at your choice lists, now.