Company car taxable benefits are assessed on carbon dioxide emission, not business miles. Generally, expensive large cars with poor CO2 efficiency will be subject to highest benefit where cheaper vehicles or lower CO2 emission cars will be most tax efficient, but the CO2/cost equation will need to be looked at carefully.

Certain cars, particular those using LPG, electricity, or bi-fuel cars, can now qualify for complete exemption from benefits. These vehicles also qualify for 100% capital allowances as a deduction in business tax computations for self employed individuals and partnerships and can thus provide a useful mechanism for reducing taxable income.

If you use your own car for business you can claim a deduction for car expenses under the fixed profit car scheme, in place of deducting actual expenses incurred.

The amount allowable is 40p per mile for the first 10,000 miles, 25p per mile thereafter.

In view of the high level of charge to fuel benefit for private fuel provided by an employer for use in a car driven by an employee (which includes directors), it is now generally advisable to ensure that all private fuel is required to be and is reimbursed to the employer by the employee. Records will need to be kept to support the amount of private fuel reimbursement, which the employee is required to make.

To ascertain the amount of the benefit chargeable, the same percentage figure used to calculate the car benefit charge for the company car, which is directly linked to the car’s CO2 emissions, is used to calculate the fuel scale charge for fuel provided for private motoring. The relevant percentage figure will be multiplied by a set figure for the tax year.

For 2007/08 this figure is £14,400. The charge will be proportionately reduced where the employee stops receiving free fuel part way through the tax year, but where free fuel for private motoring is subsequently provided in the same tax year, the full year’s charge will be payable.

We hope you find the above of interest and as indicated earlier, will be pleased to advise you further on any specific points.

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