THE COMPANY OF CLASSICS
by Peter Disney
The normal benefit in kind rules relating to company cars apply a percentage based on CO2 emissions (between 16% and 37%) to the car’s list price when new. Tax is then calculated at the taxpayers highest rate of tax. So usually cars with large and thirsty engines or cars with high list prices should be avoided. We are obviously being “driven” by our lords and masters at Westminster towards running smaller, cheaper hybrid or fully electric cars.
However different rules apply to so-called “classic cars”.
For tax purposes a car registered before 1st January 1998 with a current market value greater than its list price meets HMRC’s “classic car” criteria. So instead of the usual benefit in kind percentages mentioned above using the CO2 emission, the following percentages will apply:
0 to 1,400cc : 15%
1,401 to 2,000cc : 22%
Over 2,000cc : 32%
At first glance you may think that these are pretty similar to the rates charged on new cars and think “what’s the point?”
However the next consideration is more important because it asks whether the market value exceeds £15,000.
If the market value is £15,000 or less, then the percentage is applied to the original list price of the car when it was new. Imagine buying and running an MGB, Lotus or TVR and only being taxed based upon the list price when it was new two or three decades ago?
The higher running costs of running a classic car will be offset by the fact that you can reclaim the vat on any maintenance costs and by the tax relief you can claim in your business accounts.
Don’t forget that if the market value does exceed £15,000 then the percentage is applied to the current market value but it may still be worthwhile depending on what you wish to drive.
In almost all cases it is unlikely that letting your company pay for private fuel will be worthwhile.
Peter Disney is the Managing DIrector of the award-winning Wood & Disney Chartered Accountants. A founder member of the Association of Profit Advisers, he loves cartoons and has an unnatural relationship with his colourful shirt and sock collections. Peter drives a classic Morgan when the sun comes out.
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