Company cars and fuel, Tax free meals, Income verification

Last week we turned our attention to employee benefits, in particular company cars and meals taken while away from the normal workplace. The rules and rates for taxation of both these benefits are changing from 6 April 2016, so you need to inform your clients. We also shared news on the provision of tax calculation statements by HMRC for mortgage purposes.

This is an extract from our topical tax tips newsletter dated 10 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Company cars and fuel
As we predicted in our newsletter on 12 November 2015 the 3% supplement for diesel powered company cars is to be retained after 5 April 2016. As a result the taxable benefit for using a diesel company car will increase in 2016/17 rather than decrease as had been expected.
 
This announcement was made in the Autumn Statement on 25 November 2015, which will have been too late for many tax rates and tables books published this year. HMRC's online calculator for car and fuel benefit currently doesn't cover 2016/17, but that may updated in January 2016.   
The percentage of list price used to calculate the taxable benefit for all company cars will increase by two percentage points from 2015/16 to 2016/17. This includes cars with CO2 emissions under 51g/km, which will be taxed at 7% of the list price, or 10% for a diesel car.
 
The maximum percentage of list price used for the benefit calculation is now set at 37%. That level will be achieved by diesel cars with CO2 emissions of 185g/km or more in 2016/17. Petrol cars will achieve the maximum at CO2 emissions of 200g/km or more.
 
As around 81% of company cars are diesel powered, you need to inform your clients of this change so they are prepared for higher tax and class 1A NIC liabilities in 2016/17. Look out for notices of coding for 2016/17 and check that the correct taxable benefit for the company car has been included.
 
If a taxpayer has a company car in most cases it is not economical to take free fuel for private use, as the fuel used will cost less than the tax payable on the fuel benefit. Instead of free fuel the taxpayer should claim the cost of fuel used on business journeys, from his employer, using the advisory fuel rates. Those advisory rates have been revised with effect from 1 December 2015, mostly downwards, but the old rates can be used for journeys taken before 1 January 2016.

This is an extract from our topical tax tips newsletter dated 10 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>