Tax and Travel
Car and fuel benefits
The taxable petrol and diesel car benefit is based on the car's CO2 emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first two lines of figures in the table relate to qualifying low emissions cars (QUALECs).
The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2010/11 increases from £16,900 to £18,000.
The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:
- 2% for cars manufactured to be capable of being run on E85 fuel
- 2% for bi-fuel cars or those which run on LPG only
- 3% for hybrid electric and petrol cars.
For cars which cannot produce CO2 engine emissions under any circumstances when driven, the appropriate percentage is reduced to 0%, thereby reducing the car benefit charge to nil.
For cars emitting between 1 and 75g/km the appropriate percentage is reduced to 5% for 5 years from 6 April 2010.
Future changes
With effect from 6 April 2011, the list price cap of £80,000 is being withdrawn. This will increase substantially the tax charge for drivers of very expensive cars. For example for a car with a list price of £170,000 and CO2 emissions of 320g/km, the annual taxable benefit will increase from £28,000 to £59,500.
For each of the two next tax years, the CO2 emissions thresholds will be shifted down by 5g/km and from 6 April 2012 the table of tax bands will be extended down to a new 10% band for cars emitting up to 99g/km. This will replace the existing 10% band, so that QUALECs will no longer exist as a separate category.
VAT on fuel for private use in cars
Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge.
The table shows the VAT chargeable for quarters commencing on or after 1 May 2010.
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Mileage rates
Changes to the HMRC business mileage rates are announced from time to time. The rates at the time of the Budget are as follows:
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The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.
HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.
Car costs – Vehicle Excise Duty (VED) rates
Vehicle Excise Duty ('Car Tax') rates also reflect emissions, with lower scale rates for cars using alternative fuels. The following table shows the rates which apply from 1 April 2010 for cars registered on or after 1 March 2001:
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Company vans
The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £550 taxable benefit if the employer provides fuel for private travel.
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The flat rate of £3,000 is reduced to nil for vans emitting zero CO2. There will be no fuel benefit for such vans.
