Benefit-in-kind tax changes to encourage lower carbon car purchases from 6 April

Thu 09 February 2012 View all news

Regulations for qualifying low emission cars (QUALECS) - those with CO2 emissions below 120g/km - are to be scrapped from 6 April this year. Businesses offering company cars will be affected by the move, which will change car benefit charges and which are intended to further incentivise the purchase of lower carbon cars.

In the UK car benefit charges are calculated by multiplying the price of a car, including accessories and any reduction in capital contributions the vehicle may have, for tax purposes.

Data gathered by Lex Autolease, the UK’s largest leasing company, reveals that 45% of new car orders will fall into the 100 g/km to 120 g/km tax band and be hit by the so called ‘QUALEC effect’. The figures are based on a sample of Lex Autolease deliveries to customers between August 1 and October 31 last year.

These vehicles, as well as any existing company cars with emissions of more than 99 g/km of carbon dioxide, will be subject to a higher tax burden from the new financial year starting on April 6 when the rules for qualifying low emission cars (QUALEC) are abolished.

The future cost increase is attributed to HM Revenue and Customs’ decision to lower the 10% tax threshold from 120 g/km to 99 g/km.

Lex Autolease calculates that around 8% of cars ordered will qualify for the new 10% company car benefit-in-kind tax band (76-99g/km).

Fleet and business drivers seeking to avoid this April’s tax changes are advised to consider sub-99g/km cars, or even sub-95g/km, to guard against possible further changes in April 2013.

Lex Autolease says that there are currently over 200 model/trim levels outputting exactly 119 g/km, which will be taxed at 14% instead of 10% in April 2012, rising to 15% in 2013 (add 3% for diesel models).

The new standards are intended to act as an incentive to businesses to choose more environmentally friendly vehicles as a means to cut costs and lower their carbon footprint.

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