The arrival of the new 13-band CO² emissions-based Vehicle Excise Duty (VED) scale, with new rates applicable from May 01 2009, accompanied details of the future direction of the company car tax system in Budget 2009.

It was also indicated that the Government is considering the abolishment of the 3% diesel tax supplement in company car tax for diesel cars complying with Euro 6 emissions standards. There is also intention to abolish the 10% tax rate for the cleanest cars in favour of an extended tax band system with a 1% rise for every 5g/km increase in CO² emissions from 10%.

The key points raised in the Budget 2009 are:

VED rises in 2009/10 effective from May 01 2009 amount to no more than £5 per car in all bands compared with the previous year.
Cars emitting over 225g/km of CO² qualify in new ‘Band M’ from May 01 2009 at a rate of £405.
In 2010/11, new first year rates for all cars apply, with liability set to zero for cars emitting 130g/km or less. Band M are subject to a £950 first year charge.

The new band structure is shown in table format below, enforced as of May 01 2009.

VED Bands for 2009/10 and 2010/11
VED Band	CO² Emissions (g/km)	2009/10** Standard Rate (£)	2010/11 First Year Rate (£)	2010/11 Standard Rate (£)
A	Up to 100	0	0	0
B	101 – 110	35	0	20
C	111 – 120	35	0	30
D	121 – 130	120	0	90
E	131 – 140	120	110	110
F	141 – 150	125	125	125
G	151 – 165	150	155	155
H	166 – 175	175	250	180
I	176 – 185	175	300	200
J	186 – 200	215	425	235
K*	201 – 225	215	550	245
L	226 – 255	405	750	425
M	Over 255	405	950	435
* Includes cars with emissions above 225g/km registered between March 01 2001 and March 23 2006. ** Alternative fuel discount 2009/10: £20 Bands A-I, £15 Bands J-M. 2010/11 £10 for all cars. Rates for 2009/10 apply from May 01 2009.

Company Car Tax

The lower emissions threshold for company car tax in 2009/10 will remain at 135g/km, the same as the previous year. In 2010/11, however, this lower emission threshold will reduce to 130g/km, with a 3% surcharge applicable on diesel cars. For 2011/2012, the threshold for lower emissions will once again drop, this time to 125g/km. The point at which a car qualifies for the 10% Benefit In Kind (BIK) tax rate (13% for diesels) remains at 120g/km.

It has been indicated by the Government that the 10% BIK tax rate will be abolished in 2012 in favour of an extended tax band system with a 1% rise for every 5g/km increase in CO² emissions from 10%. Specific rates and thresholds will be confirmed in future Budgets.

The Government is also is considering abolishing the 3% supplement for diesel cars complying Euro 6 emissions standards. Further information concerning this will be released at a later date. The chart below shows the BIK sliding scale for 2009/10 and beyond.

Taxable Percentages Of P11D Value
% Of P11D price to be taxed	CO² (g/km) 2009/10	CO² (g/km) 2010/11	CO² (g/km) 2011/12
10*	120	120	120
15*	135	130	125
16*	140	135	130
17*	145	140	135
18*	150	145	140
19*	155	150	145
20*	160	155	150
21*	165	160	155
22*	170	165	160
23*	175	170	165
24*	180	175	170
25*	185	180	175
26*	190	185	180
27*	195	190	185
28*	200	195	190
29*	205	200	195
30*	210	205	200
31*	215	210	205
32*	220	215	210
33**	225	220	215
34***	230	225	220
35****	235	230	225
* Add 3% for diesel. Add 2% for diesel. * Add 1% for diesel. **** Max charge, so no supplement.

Calculating Your Liability For 2009/10

To calculate your BIK liability for 2009/10 you will need to know:

The CO² emissions in g/km of your car.
The P11D value of the car (the price of the car including delivery, the cost of any optional extras and VAT, but including VED and Government First Delivery Charge).
Whether or not the car is a diesel. All diesel cars registered on or after January 01 2006 are subject to a 3% tax charge.

A Company Car Tax calculator can be found at www.vcacarfueldata.org.uk/search.

Capital Allowances And Lease Rental Restriction

The write-down amounts claimable against tax for company cars changed in April 2009 from a price-based structure to a new system based on CO² emissions. In line with the Government’s lean towards all things ‘green’, this new legislation favours vehicles with low CO² emissions with an effective date of April 01 for corporation tax and April 06 2009 for income tax.

Cars first registered from April 01 2009 with CO² emissions of 11g/km to 160g/km inclusive attract a 20% Write Down Allowance (WDA), while those with emissions above 160g/km attract a WDA of 10%. For cars with CO² emissions of 110g/km or less a 100% first year allowance applies, with the allowance available until March 2013. Cars already ‘on-fleet’ at these dates will continue with liability set at the previous price-based system, until disposal, with a transition period expected to be in the region of five years imposed from the date of inception of the new system.

Lease Rental Restrictions have also been brought into line with this new emission based system with cars first registered on or after April 01 2009 with CO² emissions of 160g/km or less, are eligible for 100% of their lease payments to be offset against corporation tax. For new cars with emissions over 160g/km registered from this date, only 85% of their lease payments can be offset.

Class 1A National Insurance Contributions 2009/10

When employees are provided with company cars and fuel which is also available for private use may be liable for Class 1A NICs, payable by the employer, for any of the following reasons, at 12.8% of the car’s taxable value:

Director.
Employees who are paid at a rate of £8,500 or more a year, including taxable benefits and expenses if the car is available for private use by the director or employee, or by members of their family or household.

Fuel Allowances

The Government set figure used for calculating the tax due on employer provided fuel for private use in a company car remains at £16,900 in 2009/10. To make this calculation you need to know:

The car’s combined fuel consumption and BIK tax percentage.
The price of fuel used.
The driver’s marginal tax rate and Government set figure.

The HM Revenue & Customs Authorised Mileage Allowance Payments (AMAPs) set tax and national insurance exempted rates claimable for business mileage in a private car. The rates for 2009/10 remain the same as those set for the previous year at 40p up to 10,000 miles and 25p after this threshold.

Fuel cost claims made to employers at a lower rate than the AMAP rate entitle the driver to tax relief on the difference. Claims made at a lever higher than the AMAP rates will incur tax.

Light Commercial Vehicles

Company light commercial vehicles and double cab pick up trucks, which are used for private mileage, incur BIK tax for the driver, based on a taxable value of £3,000. If free fuel is provided by the employer for private mileage then the table value rises to £3,500.

The annual tax figure payable for private use in these vehicles when used for private mileage is calculated as follows:

£3,000 x 20% = £600 for a 20% tax payer
£3,000 x 40% = £1,200 for a 40% tax payer

Employers who take their company van home to enable them to drive direct to customers the next day but are not allowed any private use are exempt from tax.

2009/10 Class 1A NICs for vans are calculated on the same basis as BIK tax with the figure liable calculated by multiplying the taxable values by 12.8%.

The reduced rate of VED for Euro IV vans was removed for vehicles produced after December 31 2006 but remains in place for Euro IV vans registered between March 01 2003 and December 31 2006. New VED rates apply from May 01 2009, see below:

VED in 2009/10: Vans
All pre-graduated VED vans (registered before March 2001)	£190
Euro IV vans (registered between March 01 2003 and December 31 2006)	£125
Euro IV vans (registered after December 31 2006)	£185