Energy efficient cars

Capital allowances

As we go to print the recent threatened fuel shortages are still fresh in our minds and the threat of escalating prices a stark reality. This might serve to focus attention a little more closely on energy efficient cars. Since April 2002, a business purchasing a car with CO2 emissions not exceeding 120 grams per kilometre (gm/km) has been able to claim a 100% capital allowance. In other words the full purchase price can be deducted from business profits in the year of purchase. Back in 2002 the allowance whilst attractive was not a reality for many since very few cars met the emissions criterion. However the list has now expanded and you may be pleasantly surprised to find the Audi A2 1.4 TDI on the list, as well as the Citroen C3, Renault Megane and VW Lupo. Try www.comcar.co.uk for a useful comprehensive list of qualifying vehicles.

A car costing say £14,000 would normally only qualify for a capital allowance in year one of £3,000 (being 25% of £12,000 since £14,000 constitutes an ‘expensive’ car). However the Audi A2 1.4 TDI with emissions of 116gm/km would qualify for an allowance of the full cost of £14,000.

Company cars

Since April 2002, company cars have been taxed according to their list price and the CO2 emissions of the car. A percentage of the list price (generally between 15% and 35%) is taxed dependant on the level of CO2 emissions.

Diesel cars initially attracted a 3% supplement. However for ‘clean’ diesels (ie those meeting the Euro IV emissions standards) the 3% supplement was waived. The waiver is now being abolished from 6 April 2006 for all diesel cars registered on or after 1 January 2006. The message is clear - any new diesel company car registered by the end of 2005 will retain the benefit of the waiver even after 5 April 2006. On a £25,000 car the waiver is worth £750 a year in reduced taxable benefit.

Every little helps!