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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 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 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 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 1980 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 10 November 2020. See terms and conditions.

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