Company car drivers could be in for a shock in the wake of the Volkswagen diesel emissions scandal. That’s according to London chartered accountants, Blick Rothenberg. Company car benefits are based on the list price and the approved CO2 emissions of the vehicle, with diesel-engined cars attracting a 3% supplement.
It stands to reason that if cars are retested following the scandal, company car tax could rise on a number of vehicles. It has been confirmed that Volkswagen, Audi and Skoda models fitted with the EA189 diesel engine are affected, all of which are popular within the fleet sector.
Higher taxable benefits for employees
Caroline Le Jeune, partner at Blick Rothenberg, said: “For UK-based employees with company cars, the taxable value of the benefit as shown on the employee’s P11d is likely to have been incorrect.
“Whilst there is no expectation of HMRC taking retrospective action in these highly peculiar circumstances, no official comment has been made.
“Going forward, company car benefits are likely to need to be recomputed using the updated CO2 emissions figures, which will lead to higher taxable benefits for employees.”
The government moved from the old mileage-based system in 2002, switching to the more complicated approach based on CO2 emissions and list price. In short, the more CO2 your car emits, the more tax you pay. A tax escalator ensures the bill can go up every year, so many company car drivers will be awaiting the conclusion of this scandal with interest.
It’s too early to speculate whether this will result in more drivers choosing to take the alternative cash allowance, or indeed weigh up their options when the list of available cars is next passed around the office. But there’s little doubt that the emissions scandal could have deep ramifications for the wider business community.
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