Whether you use your own car for work or have a company car, fundamental tax changes coming into effect in two days will impact on you.
Architects, especially site architects and those who are regularly on the road, will undoubtedly be affected by the new legislation.
Old rules Many employees use their own cars for business, and in return receive a 'pence per mile' payment from their employers. The Inland Revenue publishes approved mileage rates (AMR), which until now have been based on engine size. If the employer pays below the AMR then you get tax relief on the difference. If you are paid over the AMR, you are liable to tax on the excess. For the year ending 5 April 2002, the approved rates are as below and it should be emphasised that only business miles qualify for relief (not commuting to work).
So when your tax return thuds onto your doormat sometime in the near future, these are the figures to bear in mind for 2001/2002.
Remember that employers are not infallible. While most will keep you informed of the mileage rates being paid, there are still a few who either do not know or will not tell you, and pay rates that have been plucked out of thin air. This can leave you with a nasty shock at the end of the year when you receive an unexpected bill for that taxable excess. The employer's fault - but the employee's bill!
New rules The Finance Act 2001 changes this from 6 April, and introduces a statutory exemption for employees using their own vehicles for work, irrespective of engine size. The exempt amount is again expressed in terms of pence per business mile.
The rates must be paid in respect of business miles conducted in your own vehicle and the total payment must not exceed the result of business miles multiplied mileage rate.
Again, where the payments are less than the approved rates, the employee gets a deduction for mileage allowance relief. If the payment received exceeds the approved rate, then the excess is taxable.
Lloyd Williams is an independent tax consultant COMPANY CARS: COUNTING THE COST From this month, a new system has been introduced for calculating the financial benefit of having a company car. Many architects and professional people enjoy such a benefit and will need to be aware of what is in store.
Until now, the tax charged on company cars was based on a percentage of the list price, the business miles and the age of the car.
However, as part of an environmental exercise, the tax charge from April 2002 is graduated in accordance with the car's CO 2emissions.
The list price is multiplied by a variable percentage figure, which ranges from 15 per cent for cleaner, fuel-efficient cars, to a maximum of 35 per cent for those with the highest CO 2emissions. Some useful guidance is given below:
LIST PRICE This includes the list price of the car with standard accessories, plus the list price of optional accessories when the car was first made available to the employee. It also includes the cost of any other later accessory more than £100.
SLIDING SCALE CO 2levels are measured in grams per kilometre (g/km). The 'entry' level for 2002/03 is 165g/km, which will result in a taxable benefit of the car's list price multiplied by 15 per cent. The sliding scale increases from 15 per cent, in 1 per cent steps for every 5g/km over the entry level, so an emission figure of 178g/km will attract a taxable benefit of 17 per cent of the list price. The intention is to reduce the entry level as cars become more environmentally friendly.
APPROVED CO 2FIGURE All new cars registered in the UK from March 2001 carry an approved CO 2emission figure shown on the vehicle registration document (a figure that is set for the life of the car).
NO APPROVED CO 2FIGURE All cars first registered in the UK pre-1998 will not have an approved emissions figure. The tax charged on these cars will be based on the engine capacity.
1 JAN 1998-28 FEB 2001 Cars first registered in the UK between these dates may not have an emissions figure readily available.The Society of Motor Manufacturers and Traders (SMMT) is providing a free online CO 2enquiry service. Visit www. smmt. co. uk and follow the prompts to obtain the CO 2figure for your car.
DIESEL CARS The percentage limit of the price based on CO 2emissions will be increased by three per cent. So if the percentage based on CO 2is 15 per cent, then a figure of 18 per cent will apply to diesel vehicles. But this addition cannot take the maximum charge to more than 35 per cent of the list price.
Most company cars will fall within the above categories but if, for example, you have a car first registered in another country, or one propelled by alternative fuel, etc, you should phone your tax office and ask for the relevant information.