Private cars in tax rules shake-up (From The Bolton News)

Private cars in tax rules shake-up

BUSINESSES are being warned not to ignore new laws which relate to the use of private cars at work.

David Cowen, tax partner at chartered accountants Jackson Stephen, said today: "There has been a lot of publicity surrounding new company car tax rules, but nothing in relation to how the thousands of privately-owned vehicles used for business will be affected."

Under the current scheme, sometimes referred to as the 'Fixed Profit Car Scheme', employers pay a standard amount for every business mile driven by employees in their own car.

The Inland Revenue publishes figures each year to determine how much employers are allowed to reimburse without causing their staff to suffer an extra tax charge.

From April 6, 2002 it is to be simplified to allow employers to pay staff 40p for each of the first 10,000 business miles driven in any given tax year.

If the level of business mileage covered goes above that figure, then the amount that can be reimbursed tax-free drops to 25p per mile.

Mr Cowen said there would be winners and losers.

"Drivers, for example, of smaller private cars up to 1500cc will always be better off than they were previously," he said.

"They will also gain most if they cover a high level of business mileage.

"In addition, drivers of medium-sized cars with engines between 1501 and 2000cc will be better off as long as they drive more than 5,333 business miles a year."

He added: "Drivers of cars over 2000cc will, however, always be worse off from next year."

One further development starting in April, 2002 is that employers will be able to reimburse an additional 5p per mile tax-free where passengers are carried for a business journey.

A driver with three passengers could, therefore, be paid up to 55p per mile without incurring a tax charge.