A tax charge arises on company cars where—
Cars made available to employees, or to members of their family or household, are deemed to be made available by reason of the employment, unless the employer is an individual and makes the car available by reason of domestic, family or personal relationships.
The time when a car is first made available to an employee is the earliest time when it is made available by reason of his employment, and without the transfer of the property in it, to him or any member of his family or household. The last day on which a car is available to an employee is the last day on which it is available by virtue of the employment without the transfer of the property in it to him or to members of his family or household.
A car is “made available” to an employee by an employer if it is jointly owned by both the employee and employer, or leased by the employer and then on-leased to the employee; see further below. A car falls within this legislation when it is purchased using the company's credit facilities, even when the subsequent payments are debited to a director's loan account. It should also be noted that the legislation does not require the employee to be in a position to make use of the vehicle in order for it to be “available”.
If the provision of the car falls within (a) to (d) above, then the cash equivalent of the benefit is treated as earnings chargeable as employment income, provided that it is not otherwise taxable as part of the employee's income.
The cash equivalent value value of the benefit is a percentage of the list price of the car, including any qualifying accessories. The appropriate percentage depends on the level of the car's carbon dioxide emissions (rounded down to a multiple of five).
For 2012/13 to 2014/15, the appropriate percentage for cars which could not emit carbon dioxide was 0%. The appropriate percentage for cars with carbon dioxide emissions between 1 – 75g/km was 5%. For 2015/16 the appropriate percentage for cars with carbon dioxide emissions between 0 – 50g/km is 5%, increasing to 9% for emissions between 51 and 75g/km. The equivalent percentages are 7% and 11% for 2016/17.
For all other cars, where the carbon dioxide emissions figure is less than the ‘relevant threshold’ for the tax year (see below), a percentage of 10% applied in 2012/13 and 2013/14, increasing to 11% in 2014/15, 13% in 2015/16 and 15% in 2016/17. Where the carbon dioxide emissions figure equals the relevant threshold, the percentage was 11% in 2012/13 and 2013/14, increasing to 12% in 2014/15, 14% in 2015/16 and 16% in 2016/17.
Where the applicable carbon dioxide emissions figure exceeds the ’relevant threshold’, a further 1% is charged for each 5 grams per kilometre of that excess, up to a maximum of 35% in 2012/13 – 2014/15 and 37% in 2015/16 and 2016/17. This maximum is reached at emissions of 220g/km in 2012/13, 215g/km in 2013/14, 210g/km in 2014/15 and 2015/16, reducing to 200g/km in 2016/17.
In the case of a car powered by diesel, the percentages calculated above are increased by 3% up to the maximum percentage for the tax year. From 2016/17, diesel cars will be taxed at the same rate as petrol driven cars.
The “relevant threshold” is ascertained by reference to the following table—
|Year of assessment||Relevant threshold
(in grams per kilometre)
There is a conditional exemption in relation to cars provided for disabled employees.