COMPLIANCE
C ompany cars are a well-established taxable benefit many employers provide to their employees, either as a discretional benefit or because the employee genuinely needs the vehicle to carry out their job. They’re one of the most valuable non-cash benefits employers regularly provide and, as such, how the Government chooses to tax them has a significant impact on both Exchequer revenues and the behaviour of companies and employees. The company car tax system In 1999, the company car tax system was reformed so that the chargeable value of this benefit would be calculated using a vehicle’s carbon dioxide (CO 2 ) emissions to encourage the use of more efficient and less polluting vehicles. The Government uses this system to influence decisions about car purchases, from individuals choosing a vehicle for themselves to fleet managers contracting to purchase dozens, hundreds or even thousands of vehicles. It’s underpinned by a series of European standards for how car manufacturers establish the CO 2 emissions value of their vehicles, using specific driving and road conditions, with results measured in grams per kilometre (g/km). The basic calculation of a car’s chargeable value is its initial manufacturer’s list price multiplied by an ‘appropriate percentage’, which depends on the car’s CO 2 emissions. The Government sets these percentages, which HM Revenue and Customs publishes in various tables 1 . The basic premise is that the higher a car’s emissions figure, the higher the percentage. In this way, cars which produce more emissions (due to having larger engines or operating less efficiently) will have
POTENTIAL SHOCK IN STORE FOR PLUG-IN HYBRID COMPANY CAR USERS
Terri Bethel MCIPPdip, IPP Education Content Developer, considers the possible impacts of CO 2 emissions changes of plug- in hybrid electric vehicles (PHEVs) on the provision of company cars
| Professional in Payroll, Pensions and Reward | November 2025 | Issue 115 30
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