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Company Car Tax Guide
Changes to Car Benefit Rules 2006/07
The car benefit charge for a full year is obtained by multiplying the price of the car for tax purposes (in most cases, its list price plus accessories less capital contributions) by the 'appropriate percentage'. A more detailed guide is available for employees in the IR203 self-assessment helpsheet (www.hmrc.gov.uk/helpsheets/ir203.pdf) and for employers in booklet 480 (www.hmrc.gov.uk/guidance/480.pdf).
Changes to the rules for calculating the appropriate percentage from 2006/07
The appropriate percentage is based on the car's approved CO2 emissions figure. There are some supplements and reductions to take account of different fuels. The rules governing the supplements and reductions change with effect from 2006/07.
This table summarises the new rules from 2006/07:
| Type of fuel |
Code |
Standard adjustment |
Other adjustments |
| Petrol |
P |
none |
none |
| Diesel (not Euro IV) |
D |
supplement: 3% (see note 1) |
none |
| Diesel (Euro IV) first registered on or before 31 December 2005 |
L |
cancel type D supplement, above |
none |
| Diesel (Euro IV) first registered on or after 1 January 2006 |
L |
supplement: 3% (as type D; see note 1) |
none |
| Electric only |
E |
reduction: 6% |
none |
| Hybrid electric |
H |
reduction: 3% |
none |
| Gas only |
B |
reduction: 2% |
none |
| Bi-fuel with CO2 emissions figure for gas (note 2) |
B |
reduction: 2% |
use lowest CO2 figure |
| Bi-fuel conversion, or other bi-fuel not within type B |
C |
none |
none |
Notes
1. Subject to the overall maximum appropriate percentage of 35%.
2. Cars which were type approved as bi-fuel cars and were first registered on or after 1 January 2000. These cars have two approved CO2 emissions figures, one each for petrol and gas (though only one may appear on the Vehicle Registration Certificate, V5C).
Supplements and reductions only apply to cars first registered on or after 1 January 1998. They apply to all such cars, whether or not they have an approved CO2 emissions figure.
Summary of the changes to the 2005/06 rules
The changes are:
- types B and H: standard reduction increased by 1% each (to 2% and 3% respectively)
- but the extra adjustment for very low CO2 emission cars no longer applies
- type C: reduction no longer applies
- type L: supplement for type D cars also applies to type L cars first registered on or after 1 January 2006.
The changes will be incorporated into the HMRC website car and car fuel benefit calculator when it is extended to cover 2006/07. The previous rules continue to apply to all years from 2002/03 to 2005/06, so those years will be unaffected. The changes to the calculator will be made after the 2006 Budget.
September 2005
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Business Advice