Businesses which run luxury cars for senior employees through company accounts are set to be hit with a new income tax charge, which comes into effect next month.
The new rules - being introduced on April 6 - will see the expenses and benefits (P11D) tax paid on high-end company cars such as: Ferraris, Lamborghinis, Bentleys, Mercedes and BMWs, increase significantly as the £80,000 maximum list price cap is abolished.
Under the current HM Revenue and Customs’ system, income tax and national insurance contributions (NIC) have been restricted due to this cap, resulting in a maximum income tax of £14,000 per a year and NICs of £3,584.
The tax increase would mean that some organisations face an increase of 182% compared to this year with the cap in place. Critics of the ruling have warned that the changes could hit less wealthy owners of older model cars.
David Heaton, employer consulting partner at Baker Tilly, said: “Removing the £80,000 maximum list price is an easy hit for the government, as it affects a select group of wealthy drivers.
“The super-rich may not worry about the extra tax, but there is a real danger that some drivers of older company-owned supercars could be caught out: you can pick up a 2005 model Ferrari 612 Scaglietti for about £65,000, but as a company car the tax bill is based on its list price of £177,000: £39,500 of tax and NIC per year to drive a car worth £65,000 is not very attractive.”
Other car tax changes likely to come into force include: reducing tax on qualifying low and ultra-low emission cars, scrapping any special discounts for hybrid or bi-fuel cars and adding a 3% surcharge to all diesel vehicles.
© Crimson Business. Ltd 2011