•  New Regulations Driving Up Costs 


    From April 2013 the running costs of new company cars could rise by £30 per month as a result of taxation changes announced in the March 2012 Budget.

    The sudden cost hike is due to the unexpected reduction in the company car taxation threshold of high CO2 emitting vehicles to 130g/km from 160g/km.


    Capital allowances for new company cars with emissions between 131-160g/km will fall to 8% from 18%. In addition, organisations leasing new company cars within this emissions range will be restricted by the amount of corporation tax they can recover on finance charges. As a result, finance directors replacing 100-vehicle fleets could see annual running costs increasing by £36,000.

    April 2013 brings yet another change: the threshold for claiming 100% capital allowances will reduce to 95g/km from 110g/km and will not be applicable to leased cars.

    Finance directors should therefore consider limiting the CO2 emissions of new company cars to a maximum of 130g/km to avoid incurring higher costs. There is a broad range of cars available through leasing companies such as Lex Autolease that meet this criterion, making it feasible to design attractive car schemes for status employees, while still adhering to the new rules.

    For some company employees, however, a car is an essential tool of their trade rather than part of the benefits package. For these essential users, the focus should be on the most cost-effective vehicle that is fit for the purpose of their roles.

    There is a good selection of car models which emit less than 110g/km of CO2 and therefore currently qualify for 100% capital allowances.

    However, ahead of the further change in April 2013, there are currently only a handful of models with emissions of 95g/km or less which are suitable for general  business use. It could make sense for finance directors to bring forward acquisitions planned for the second and third quarters of 2013 into the current tax year to take advantage of 100% capital allowances before the rule change.

    The changes announced in the March 2012 Budget – effective April 2013 – will have a significant impact on fleet costs and finance directors are well advised to review their car policies to make appropriate revisions aligned with the new rules. 


    PAUL LIPPIT, Principal Consultant, Strategic Fleet Consultancy, Lex Autolease.

11/1/2020 1:20:02 AM