The Autumn Budget has accountants, finance directors and business owners scratching their heads this morning trying to work out all the implications for their businesses and how to deal with them.
The headline figures are testing enough but the complexity of some of the changes is quite significant as the government look to fix loop holes which have been used to legally keep taxes down including Ownership Trusts, Employee Benefit Trusts, Umbrella Companies and how they recruit to avoid PAYE.
Below are details of the changes to Company Car Tax which not only increases the cost of a company car but indicates that there will be draft legislation to fix loop holes too.
Following a Court of Appeal judgement, the government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for certain tax purposes. From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits. The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029. Amended guidance clarifies this change of approach and how it is to be implemented, including transitional arrangements, for capital allowances (CA23510 and CA23511), benefits in kind (EIM23150 and EIM23151) and business profits (BIM47730 and BIM70035). The government will also publish draft legislation relating to loopholes in car ownership arrangements, through which an employer or a third party sells a car to an employee, often via a loan with no repayment terms and negligible interest, then buys it back after a short period. This arrangement means those benefiting don’t pay company car tax which other employees pay, and so this measure will seek to level the playing field. The changes will take effect from 6 April 2026. HMRC will collaborate with stakeholders on draft legislation to ensure that legitimate schemes are not impacted ahead of the new rules being introduced in April 2026. Company Car Tax (CCT) rates will increase by 2 percentage points (ppt) for zero-emission vehicles (ZEVs) and by 1ppt for all other vehicles for the 2028 to 2029 tax year up to a maximum appropriate percentage of 38%. CCT rates will increase by a further 2ppt for ZEVs and 1ppt for all other vehicles for 2029 to 2030 up to a maximum appropriate percentage of 39%. The rates for vehicles which produce 1-50g CO2 per kilometre, which are also capable of operating for 2028 to 2029 to 2029 to 2030, will be removed. Changes should be automatically reflected in tax codes for tax year beginning 6 April 2028. Heavy goods vehicle (HGV) Vehicle Excise Duty rates will be uprated in line with the Retail Price Index (RPI) for 2025 to 2026 from 1 April 2025. The HGV Levy will also be uprated in line with RPI for 2025 to 2026 from 1 April 2025. |
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