Company car benefits and exemptions from April 2023

from Shire Magazine March-April 2023 Cheshire & Wirral

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Where employees are provided with fuel for their own private use by their employers, the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The car fuel benefit charge will increase in 2023-24 to £27,800 (from £25,300). The fuel benefit is not applicable when the employee pays for all their private fuel use.

The standard benefit charge for private use of a company van will increase to £3,960 (from £3,600). A company van is defined as “a van made available to an employee by reason of their employment”.

There is an additional van fuel benefit charge for a van with significant private use. The limit will increase in 2023-24 to £757 (from £688). If private use is insignificant, then no benefit will apply.

Since 6 April 2021, the van benefit charge has been reduced to zero for vans that produce zero carbon emissions. This measure supports the government’s climate change agenda by encouraging the uptake up of vans that emit zero carbon emissions. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax. These include:

• Cars available for business journeys only This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use. This means that the car should only be available to staff during working hours for employmentrelated duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they do not.

• Cars adapted for an employee with a disability These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.

• Pool cars Employers are not required to pay or report on ‘pool’ cars. These are cars that are shared by employees for business purposes only, and normally kept on the business premises. Employers must ensure the pool car rules are observed.

• Privately owned cars Employers do not have to pay anything on cars that directors or employees own privately.

Aled Davies FCCA is a partner at DRE & Co chartered accountants in Oswestry. For more information see www.dre.co.uk or call 01691 654 353, or visit the blog page on the news section on their website.