Will your next company car be a classic?
How would you like to drive an MGB GT or a Triumph Spitfire?
This is a serious question for car enthusiasts and one several of our clients have said a big YES to!
Surprisingly, classic cars can be quite tax efficient if you pick the right one.
In simple terms a “classic” car is one which has an age at the end of the year of assessment of 15 years or more. Next you need to find the list price of the vehicle when it was new and also the current market value of the vehicle.
If we ignore any capital contribution then the benefit in kind is always assessed on the original list price unless the car is over 15 years old and has a market value of £15,000 or more when you take the greater of the market value of the car or the list price.
For cars with no emission details (which will be most of the cars over 15 years old) you then multiply this sum by the appropriate percentage based on the engine size.
Engine Size (cc) Appropriate Percentage
|1 to 1400
|1401 to 2000
|2001 and more
So, let’s look at a Triumph Spitfire Mark II which was introduced in 1965 for just £550. The above restored Triumph Spitfire Mark II was being sold recently for £9,950. As this value is under £15,000 and the vehicle is less than 1400cc the benefit in kind would be £550 (the list price) x 15% or £82. The tax payable on the benefit would be just £16 for a 20% tax payer!
If the market value rose to say £20,000 the benefit in kind would change as the car would be deemed a classic car (over 15 years old and market value over £15,000). The benefit in kind is then based, not on the list price, but the market value so the benefit in kind would now be £20,000 x 15% or £3000. This would then give rise to tax liability of £600 for a 20% tax payer, which is still pretty low
One final point; don’t forget that currently, cars manufactured before 1 January 1978 will be entitled to a free tax disc; no car tax either for the Triumph Spitfire!
If a classic car appeals to you, then why not look at the company car route and speak to Jan Friend who can check the value of the car benefit in kind and notify HMRC accordingly.
The content in this blog is correct as at 23 October 2018. See terms and conditions.