Alastair Kendrick rounds up the main PBR points for
fleets
The pre-Budget report indicated a number of changes which will
impact on the fleet. The biggest of the proposed changes arises in
respect of capital allowances and the announcement that these new
rules will come in to place in April 2009.
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The proposed legislation now makes clear our fears that this
will result in an increased cost of car leasing. The change will
apply to all cars provided from April 2009 and will mean it will
take considerably longer for the owner of the vehicle to obtain the
full relief. This deferment means that leasing companies will be
out of pocket and therefore need to charge on that added cost to
their customers. There was welcome news that the new rules are
being worked on to give concessionary treatment for vehicles
provided to disabled employees.
I see one of the most interesting reads amongst the various
press releases issued at the time of the pre budget report was the
one entitled ‘Report on the interaction between company cars,
employee car ownership scheme cars and mileage allowance payments’.
This sets the scene over what is happening in the world of
corporate fleets. Whilst much of the data the report contained
could not be considered ‘new’ there was an one interesting fact
which shows the population of company cars which it suggests is 1.1
million. If this figure is correct then it shows a significant
reduction in company cars from 1999 of 500,000. It is likely with
the proposed changes to capital allowances that we will see this
figure drop even further.
The deferment of the vehicle excise duty changes and the scaling
down of those increases had been well predicted and in reality
given that these largely apply to the higher CO2 emission vehicle
it is unlikely this will have a significant impact on the fleet. I
cannot see that this change will discourage employers from looking
to change their car policies to take out those cars which have
higher CO2 emissions.
The proposed changes in respect of fuel is possibly not a
surprise and is set against a background of petrol price
reductions. I do feel that this proposal again reminds fleets that
they need to be looking at employee mileage. Employers should be
considering whether employees are driving sensibly and also whether
the levels of mileage can be justified. Employers need to also be
considering whether employees need to be using their cars for the
extent of business mileage or whether this can be reduced by more
use of conference calls or video conferencing. We will have to see
if there is the temptation if fuel prices reduce further for HMRC
to reduce the advisory fuel rates. It is also unlikely given the
price of fuel that we will see any serious attempt to increase the
Approved Mileage Allowance Payments.
Clearly the VAT reduction will help contract hire with this
lowering the cost by 1.25%. The reduction will also help employee
car ownership schemes and those employees who opt to take cash with
this meaning that cars will be cheaper.
The pre-Budget report brings significant changes and it is
timely for those responsible for the fleet to take a step back and
asking whether their fleet policy needs to be revised.
The author is a director in Employment Tax Services, Mazars
LLP
The new capital allowance rules
In order to encourage the choice of cars with lower carbon
dioxide emissions and also to reduce the administrative burden of
businesses identifying and tracking expenditure and of computing
capital allowances for assets in single asset pools, the reform
will include the abolition of the “expensive cars” rules. In their
place, the new regime will:
-
Maintain the existing 100 per cent first-year allowances for cars
with very low CO2 emissions (these allowances were extended for a
further 5 years in Finance Act 2008) based on a lowered CO2
emissions threshold of 110 g/km -
From April 1 2009 (for corporation tax) or April 6 2009 (for
income tax) business expenditure on cars will be allocated to one
of the two main plant and machinery (P&M) pools. Where the
expenditure relates to a car with CO2 emissions
o of 160g/km or below, it will be allocated to the main
P&M pool – attracting writing-down allowances (WDAs) of 20 per
cent a year
o of more than 160g/km, it will be allocated to the ‘special
rate’ P&M pool, attracting WDAs of 10 per cent a
year - For leases commencing on or after April 1 2009 (for
corporation tax) or April 6 2009 (for income tax) the reform
proposals also include: - o abolition of any lease rental restriction for cars with
CO2 emissions of 160g/km or less, with the consequence that the
cost of leasing such cars will be allowed in full as a deduction in
computing taxable profits
o the application of a flat 15 per cent disallowance of the
rental payments that may be deducted in computing taxable profits
in respect of rental payments for cars with CO2 emissions over
160g/km
o where there is a chain of leases, this disallowance will
apply only to rental payments made by one lessee in a chain of
leases.
The government considers that its proposed reforms should
deliver environmental benefits by encouraging businesses to choose
cars with lower CO2 emissions. The reforms also represent a
simplification of the existing rules.
Cars which were first registered before 1 March 2001 do not have
carbon dioxide emissions data on their registration documents. To
avoid the need for businesses to ascertain emissions figures, it is
proposed that expenditure on the provision of cars registered
before March 1 2001 will be allocated to the main (20 per cent)
pool regardless of their actual emissions.
Expenditure on a car that costs less than £12,000, incurred
before either April 1 2009 (for corporation tax) or April 6 2009
(for income tax), will be pooled in the general P&M pool. It is
proposed to leave the capital allowances treatment of this
expenditure unchanged. The expenditure will remain in the main (20
per cent) P&M pool regardless of the car’s emissions.
Under the current rules, expenditure that has been incurred on
the provision of a car that costs more than £12,000 and that has no
non-business use will be pooled in a single asset pool. It is
proposed to maintain this treatment, together with WDAs of 20 per
cent, under the current rules for a period of five years. For these
cars, therefore, WDAs will continue to be capped at £3,000 per
annum for that period. If the car is disposed of before the end of
the five years, a balancing adjustment will be made. But if there
remains any balance of unrelieved expenditure in the relevant pool
after the five year period, this balance will be taken to the main
P&M pool where it will be added to the pool of unrelieved
expenditure.
Source: HM Treasury
