Next April will see two changes to the CO2 bands which determine the rate of capital allowances (CAs) you can claim for the cost of company cars. What are these and are they really worth worrying about?
Green incentives
When it comes to green policies for business the government uses the stick-and-carrot method. For example, if you don’t follow its rules for disposing of commercial waste you’ll face the stick in the form of tough fines. But if you take up green incentives, for example buying low CO2 company cars, you can benefit from tax breaks. However, these are about to become less generous.
CO2 bands
From April 1 2013 for companies and April 6 for other businesses, the CO2 emission bands for capital allowances (CAs), the Taxman’s version of depreciation, will be less generous for company cars as the table below illustrates:
| CO2 emissions | Rate of capital allowances |
| before April 1/6 | April 1/6 & later |
| up to 95g/km | 100%* | 100%* |
| up to 110g/km | 100%* | 18% |
| up to 130g/km | 18% | 18% |
| up to 160g/km | 18% | 8% |
| above 160g/km | 8% | 8% |
*100% CAs can be claimed for the cost of new cars (not second-hand ones) that are unused, apart from delivery mileage, at the time of purchase.
Get in now!
There’s a clear tax planning message for any business looking to buy company cars next year or perhaps into early 2014. Where the CO2 emissions of the cars you have in mind are 160g/km or below, purchase them before April 2013. This will at the very least double the rate of CAs you can claim and could speed it up by more than ten times.
