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U-turn for company car 'perk'.

Are company cars still a perk?

This question is posed by many drivers in the light of recent changes following the Budget.

And with more than 1.7 million people driving company cars, with the taxman taking pounds 2.4 billion in taxes on car benefits as a result, much is at stake.

Ms Sheilagh Moffat, president of the Birmingham & West Midlands Society of Chartered Accountants said: "Do not be under any illusion.

"For example, if you drive 25,000 miles a year, of which 20,000 are on business, in a fully expensed pounds 25,000 company car, including fuel, you pay tax on the perk of pounds 2,048.

"If your employer did not offer you a cash alternative in lieu of the car you would be pounds 1,141 a year worse off.

"If the cash alternative was pounds 1,900 a year you would be no better/worse off assuming that you pay tax at 40 per cent, already pay the maximum national insurance and were reimbursed for business mileage at the full Inland Revenue Fixed Profit Car Scheme rates.

"If your annual mileage is a lot less, the cash alternative would need to be higher to reflect the fact that the annual total running costs per mile would increase significantly.

"If you drive fewer than 2,500 miles a year, then you face the biggest tax burden - based on 35 per cent of the car's value up to pounds 80,000. If you drive between 2,500 and 17,999 miles a year, then you will pay tax on 25 per cent of the car's value. More than 18,000 miles and you pay a tax charge on 15 per cent."

Ms Moffat believes there is no doubt that the company car will remain popular but, coupled with changes to vehicle excise duty and with congestion charging and workplace parking taxes in the offing, the new regime may make employees think twice before grabbing the 'carrot'.

She said: "Maybe it's time to ignore Jeremy Clarkson, and go for that little fuel-efficient model before Gordon Brown changes the company car tax system in April 2002.

"From this date, the existing tax system will be abolished and replaced by a tax system based on the level of pollution emission for your car."
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Publication:The Birmingham Post (England)
Date:May 21, 1999
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