GUIDE TO COMPANY CAR TAX 2017/2018.

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INCLUDING VEHICLE EXCISE DUTY, FUEL ALLOWANCES AND DETAILS OF THE 2017 EMISSIONS-BASED CHANGES.

INTRODUCTION.The 2017 Budget on March 8 confirmed the details of the CO2-based BIK bandings and rates for company cars in 2020/21. A new BIK band structure for ultra-low emitting vehicles (ULEVs) will vary the appropriate percentage between 2% and 14% depending on the number of zero-emission miles the vehicle can travel. The Budget also confirmed a 2% increase in Insurance Premium Tax from June 1, and heralded the arrival of a new Vehicle Excise Duty

(VED) system for cars registered on or after April 1 2017. Cars already registered at that date remain under the previous scheme, with a Retail Price Index-based rate rise for those in Band D and above.

But while motorists will see their company car tax, insurance and Vehicle Excise Duty liabilities increase in 2017/18, there was some good news with the confirmation of a freeze on road fuel duty for the remainder of 2017.

The Chancellor also hinted at forthcoming changes to the tax treatment of diesel vehicles as part of its commitment to improving air quality, and announced a consultation process set to ‘explore the appropriate tax treatment of diesel vehicles’ prior to making any changes in the Autumn 2017 Budget.

This MINI Guide to Company Car Tax examines the implications of the 2017 Budget for fleet operators and company car drivers.

While we have made every effort to ensure the information in this document is accurate, MINI (UK) Ltd can accept no liability for your reliance on any information contained in it. You should seek your own independent financial advice in relation to any taxation or accounting matters referred to in this document. The fuel consumption and CO2 figures quoted are obtained under standardised EU test conditions (Directive 93/116/EEC) and are for comparative purposes for vehicles fitted with standard wheel and tyre combinations. This allows a direct comparison between different models but may not represent the actual fuel consumption achieved in ‘real world’ driving. CO2 emissions can change if a different-sized alloy wheel is ordered with the vehicle. This may also lead to a change to the VED payable. More information is available at www.MINI.co.uk and at www.dft.gov.uk/vca. Information correct at date of publication, March 2017

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VEHICLE EXCISE DUTY.

VED RATES. NEW CARS FROM APRIL 1 2017

VED RATES. CARS ALREADY REGISTERED AT APRIL 1 2017

CO2 FIRST STANDARD RATE ADDITIONAL RATEEMISSIONS YEAR (YEAR TWO ONWARDS (YEAR TWO ONWARDS(G/KM) RATE FOR CARS WITH LIST PRICE FOR CARS WITH LIST PRICE OF £40,000 OR LESS) OVER £40,000)1

0 £0 £0 £310

1-50 £10 £140 £450

51-75 £25 £140 £450

76-90 £100 £140 £450

91-100 £120 £140 £450

101-110 £140 £140 £450

111-130 £160 £140 £450

131-150 £200 £140 £450

151-170 £500 £140 £450

171-190 £800 £140 £450

191-225 £1,200 £140 £450

226-255 £1,700 £140 £450

Over 255 £2,000 £140 £450

1 All cars with a list price over £40,000 are liable for a £310 supplement for five years following the first year rate, after which the rate reverts to the standard £140 a year. For cars with zero emissions the rate reverts to £0 after five years. Alternative fuel vehicles receive a £10 annual reduction on VED rates. Rates apply from April 1 2017

VED CO2 STANDARDBAND EMISSIONS RATE (G/KM)

A Up to 100 £0

B 101-110 £20

C 111-120 £30

D 121-130 £115

E 131-140 £135

F 141-150 £150

G 151-165 £190

H 166-175 £220

I 176-185 £240

J 186-200 £280

K2 201-225 £305

L 226-255 £520

M Over 255 £535

2 Includes cars emitting over 225g/km registered before March 23 2006. Rates apply from April 1 2017

A new Vehicle Excise Duty (VED) system applies to all cars first registered on or after April 1 2017, according to the rules shown above right. The new system does not apply to cars already registered at that date (shown right), which remain liable for VED in the previous 13-band structure.

The new system is summarised, right, comprising a first-year rate, with standard and premium rates payable from year two onwards:

– First-year rate: Applicable to all new cars in year one and retaining a link to CO2 emissions

– Standard rate (yr2 onwards): £140 – cars with CO2 emissions of 1g/km or over with a list price of £40,000 or less

– Additional rate (yr2 onwards): £450 – cars with CO2 emissions of 1g/km or over with a list price over £40,0001.

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COMPANY CAR TAX.Company car Benefit-in-Kind (BIK) tax rates for 2017/18 to 2020/21 are shown in the chart (above right).

In 2017/18, cars with CO2 emissions of 0-50g/km qualify for BIK tax at 9% (12% for diesels), while those with CO2 emissions of 51-74g/km qualify in the 13% band (16% for diesels). The rate for cars with CO2 emissions of 75-94g/km is 17% (20% for diesels).

To calculate your BIK tax liability in 2017/18, you need to know

your car’s emissions of CO2 in g/km, P11D value and whether or not it is a diesel.

CO2 emissions information and a Company Car Tax calculator is available for all MINI cars by clicking here or by visiting the Vehicle Certification Agency website at www.dft.gov.uk/vca

In 2020/21 a new BIK tax system is introduced, with new rates ranging from 2% to 14% applying to ultra-low emitting cars with

CO2 emissions of 0-50g/km, based on the number of zero emission miles they can cover (see table).

Example: BIK tax liability in 2017/18: A new MINI Cooper Hatch 1.5 136hp 5dr has a P11D price of £22,615 and CO2 emissions of 109g/km, putting it in the 20% BIK tax band. £22,615 x 20% gives a taxable value of £4,523, equating to yearly BIK tax of £904 (£75/month) for a 20% tax payer, or £1,809 a year (£150/month) for a 40% tax payer.

2017/18 – 2019/20 2020/21 CO2 BIK % CAPITAL BIK % BIK % CO2 ZERO BIK %EMISSIONS 2017/18 ALLOWANCE % 2018/19 2019/20 EMISSIONS EMISSIONS 2020/21(G/KM) 2017/18 (G/KM) RANGE1

0-50 9 (12) 100 13 (16) 16 (19) 0 All 2

1-50 Over 130 2

1-50 70-129 5

1-50 40-69 8

1-50 30-39 12

1-50 Up to 30 14

51-74 13 (16) 100 16 (19) 19 (22) 51-54 - 15

75-94 17 (20) 18 19 (22) 22 (25) 55-59 - 16

95-99 18 (21) 18 20 (23) 23 (26) 60-64 - 17

100-104 19 (22) 18 21 (24) 24 (27) 65-69 - 18

105-109 20 (23) 18 22 (25) 25 (28) 70-74 - 19

110-114 21 (24) 18 23 (26) 26 (29) 75-79 - 20

115-119 22 (25) 18 24 (27) 27 (30) 80-84 - 21

120-124 23 (26) 18 25 (28) 28 (31) 85-89 - 22

125-129 24 (27) 18 26 (29) 29 (32) 90-94 - 23

130-134 25 (28) 18/82 27 (30) 30 (33) 95-99 - 24

135-139 26 (29) 8 28 (31) 31 (34) 100-104 - 25

140-144 27 (30) 8 29 (32) 32 (35) 105-109 - 26

145-149 28 (31) 8 30 (33) 33 (36) 110-114 - 27

150-154 29 (32) 8 31 (34) 34 (37) 115-119 - 28

155-159 30 (33) 8 32 (35) 35 (37) 120-124 - 29

160-164 31 (34) 8 33 (36) 36 (37) 125-129 - 30

165-169 32 (35) 8 34 (37) 37 (37) 130-134 - 31

170-174 33 (36) 8 35 (37) 37 (37) 135-139 - 32

175-179 34 (37) 8 36 (37) 37 (37) 140-144 - 33

180-184 35 (37) 8 37 (37) 37 (37) 145-149 - 34

185-189 36 (37) 8 37 (37) 37 (37) 150-154 - 35

190-194 37 (37) 8 37 (37) 37 (37) 155-159 - 36

195+ 37 (37) 8 37 (37) 37 (37) 160+ - 37 Figures in brackets apply to diesels. Diesel hybrids are exempt from the 3% charge . 1 Measured in miles. 2 18% capital allowance applies to vehicles with CO2 emissions of 130g/km or less and 8% applies to vehicles with CO2 emissions of 131g/km or more

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TAXABLE PERCENTAGES OF P11D VALUE AND CAPITAL ALLOWANCE RATES 2017/18

CAPITAL ALLOWANCES & LEASE RENTAL RESTRICTION.Company cars bought outright are eligible for write-down allowances, where the capital outlay can be offset against tax.

In 2017/18, the capital allowance for cars with CO2 emissions of 76-130g/km inclusive, is set at 18% a year, while for cars with CO2 emissions of 131g/km or more, the allowance is 8% a year.

From April 2018, the main rate capital allowance threshold falls from 130g/km to 110g/km.

100% first year allowanceA 100% first-year capital allowance (FYA) applies to cars with CO2 emissions of 75g/km or less until March 31 2018. From April 1 2018, the 100% FYA threshold reduces from 75g/km to 50g/km, with the allowance applying until March 31 2021. Leasing companies cannot the first-year allowance.

Lease rental restrictionThe amounts payable on lease rentals are normally an allowable

expense for businesses that can be deducted against tax, with the CO2 emissions threshold set as for capital allowances at 130g/km in 2017/18. For new cars registered from April 2017 with CO2 emissions of 130g/km or less, 100% of their lease payments can be offset against corporation tax. For those with CO2 emissions of 131g/km or more, only 85% is claimable.

From April 2018, CO2 emissions thresholds fall from 130g/km to 110g/km in line with the thresholds for capital allowances.

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FUEL ALLOWANCES.The ‘free’ fuel benefitBIK tax is payable by drivers receiving employer-provided ‘free’ fuel for private mileage in their company cars. To work out the tax due on employer-provided ‘free’ fuel for private mileage in a company car, the 2017/18 Government fuel benefit charge (FBC) rate of £22,600 is used.

Calculating tax due on ‘free’ fuel A MINI Cooper Hatch 1.5 136hp 5dr has CO2 emissions of 109g/km

giving a BIK tax percentage of 20% in 2017/18. Its combined fuel consumption is 60.1mpg. £22,600 x 20% gives a taxable value of £4,523. Multiplying by the driver’s marginal tax rate (20% or 40% in 2017/18) gives annual liabilities of £4,523 x 20% = £904, or £4,523 x 40% = £1,809.

With the average price of petrol at £5.41/gal or £1.19/litre (March 2017), £904 will buy 167 gallons (759 litres) for a 20% tax payer or 334 gallons (1,518 litres) for a 40% tax payer.

Multiplying by the MINI’s combined fuel consumption figure of 60.1mpg gives 10,036 miles for a 20% tax payer, or 20,073 miles for a 40% tax payer – the minimum private mileages you need to cover to make the ‘free’ fuel benefit worthwhile.

If you drive fewer private miles than the calculated figures you will be better off paying for private fuel yourself. On the other hand, if you drive more private miles than the calculated figures you are better off paying the tax.

BUSINESS MILEAGE. PRIVATE CAR

The HMRC mileage allowance payments (MAPs) for business mileage reimbursement in a private car are shown below for 2017/18.

The rates are the tax and NIC-free amounts claimable per mile by a driver using his/her own car on business.

MILEAGE ALLOWANCE PAYMENT (MAP) RATES 2017/18

UP TO OVER 10,000 MILES 10,000 MILES

All cars 45p 25p

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CLASS 1A NATIONAL INSURANCE CONTRIBUTIONS.Class 1A National Insurance Contributions are payable by the employer on the company car benefit, and employer-provided ‘free’ fuel for private use, at the rate of 13.8% in 2017/18.

For the ‘free’ fuel calculation, the 2017/18 fuel benefit charge rate of £22,600 applies to the car’s taxable value.

Calculating Class 1A NIC – cars A MINI Cooper Hatch 1.5 136hp 5dr, with a P11D price of £22,615 and CO2 emissions of 109g/km, attracts a tax charge of 20% of its P11D value in 2017/18. £22,615 x 20% gives a taxable value of £4,523. Multiplying by 13.8% derives the annual Class 1A NIC contribution due – £624.

Calculating Class 1A NIC – ‘free’ fuel Multiplying the fuel benefit charge (FBC) figure of £22,600 by the MINI Cooper Hatch 1.5 136hp 5dr’s 20% tax charge gives a taxable value of £4,520. Multiplying by 13.8% derives the annual Class 1A NIC due – £623.

For further information on Class 1A NIC on car and fuel benefits, click here.

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GOVERNMENT PLUG-IN CAR GRANT FOR ULEVs.Changes to the way in which ultra-low emitting vehicles, or ULEVs – defined as electric or part-electric cars that emit 75g/km of CO2 or less – attract the Government plug-in car grant (PiCG) came into force on March 1 2016, based on the environmental performance of the car.

All ULEVs are now placed into three categories depending on their emissions of CO2 and their zero-emission range. The three categories are summarised (see right).

Summary: ULEV grant categories 2017/18

Category 1: cars with CO2 emissions of less than 50g/km and a zero-emission range of over 70 miles receive a grant of £4,500. Category 2: cars with CO2 emissions of less than 50g/km and a zero-emission range of between 10 and 69 miles receive a grant of £2,500. Category 3: cars with CO2 emissions of 50-75g/km and a zero-emission range of at least 20 miles receive a grant of £2,500.

A price cap is also in force: Category 2 and 3 cars with a list price of more than £60,000 are not eligible for the PiCG, but all Category 1 cars with a zero-emission range of more than 70 miles qualify for the full £4,500 grant.

The grant levels are guaranteed until at least October 2017, and are administered by the Office for Low Emission Vehicles (OLEV). More information and a link to the Go Ultra Low selector guide is available at www.gov.uk/government/organisations/office-for-low-emission-vehicles.

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