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Fancy a Classic Car as Your Company Car?

23 October 2018
Jan Friend
Reducing Tax, Accounting & Compliance, Payroll

Will your next company car be a classic?

How would you like to drive a fun Fiat 500 from the sixties or a cool Lancia Fulvia from the seventies?

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 registered before 1 January 1998 you then multiply this sum by the appropriate percentage based on the engine size:

Engine Size (cc) Appropriate Percentage

1 to 1400

15%

1401 to 2000

22%

2001 plus

32%

 

For cars registered after 31 December 1997 with no CO2 emissions figure the following table is used:

Engine Size (cc) Appropriate Percentage

1 to 1400

15%

1401 to 2000

25%

2001 plus

35%

 

 Do note however that for cars first registered between 1 January 1998 and 28 February 2001 the Vehicle Certification Agency supply CO2 and other relevant information on their website at www.vcacarfueldata.org.uk and in their free, twice-yearly edition of the New Car Fuel Consumption and Emissions Figures booklet.

Older cars with no cylinder capacity are taxed at 32% of the list price.

So, let’s look at a fun Fiat 500. In the sixties these cars were retailing for as little as £400. We attach below a copy of genuine receipt for a Fiat 500!

fiat 500 in white

A restored Fiat 500 like the one above from the sixties can be bought for anything between £6,000 and £12,000. Let’s assume the above Fiat 500 originally cost £400. As the market value is under £15,000 and the vehicle is less than 1400cc the benefit in kind would be £400 (the list price) x 15% or £60. The tax payable on the benefit would be just £12 for a 20% tax payer!

fiat 500 reciept

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 a tax liability of £600 for a 20% tax payer, which is still pretty low.

The Lancia Fulvia below is another car with just 1300cc and a market value of anywhere between £15,000 to £30,000. The taxable benefit will be from £2,250 to £4,500 giving rise to a tax bill of between £450 and £900 for a basic rate tax payer. Not bad for a car which will definitely get heads turning!

Lancia Fulvia in blue

One final point; don’t forget that currently, cars manufactured before 1 January 1980 will be entitled to a free tax disc; no car tax either for the Fiat 500 or the Lancia Fulvia!

If a classic car appeals to you, then why not look at the company car route and speak to your tax adviser. If you are a client of Friend & Grant please contact Jan Friend who can check the value of the car benefit in kind and notify HMRC accordingly. This is another example of how we at Friend & Grant look to help our clients get the most from their businesses by paying the minimum tax!!!

If you are interested in buying a classic car like the ones in this blog then why not visit the Classic Car Company.

The content in this blog is correct as at 9 March 2021. See terms and conditions.

 

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