Leased high-CO2 cars to win on tax

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Fleets leasing cars above 160g/km could actually be better off under the new capital allowance regime, according to tax expert PricewaterhouseCoopers.

The accountancy giant has identified a £17,140 price threshold above which businesses leasing cars will benefit under the new capital allowance rules, no matter what the CO2 figure.

Speaking at the fleet launch of the Honda Insight, Tom Woodcock, tax director at PWC, said: “Leased cars above £17,140 now attract better tax relief, regardless of the CO2 output.”

While there may be increased costs to the up-front lease rate for cars over 160g/km costing more than £17,140, Woodcock believes this will be off-set by the tax gains claimed back later.

He also points out that no car under 161g/km will be worse off for tax, although for those cars with a price of less than £12,000 there will be no advantage either. The biggest losers in the capital allowance changes will be leased cars costing less than £17,140 with CO2 emissions above 160g/km.

Woodcock’s opinion was backed by a leasing industry executive who said his lease company had come to the same conclusion for cars above £17,140, adding that the up-front increase in monthly rental would be in the region of £20. Obviously, the impact upon the driver will still be based on CO2 under the long-standing benefit-in-kind rules.

Commenting on the tax changes, ACFO chairman Julie Jenner said that it depended on which department the fleet manager was linked to, as to the effect on a fleet policy.

Jenner believed that a fleet manager linked to the finance side of a business would see the gains available from the tax savings for cars falling into the expensive and high CO2, but they would be less likely to spot the advantages if they were based in the HR department of a business.
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The new capital allowance rules came in at the start of the month, applying to all new cars registered from 1 April 2009, and had been expected to curtail business sales of high CO2 cars.