Proposed changes to vehicle corporation tax

A series of changes to vehicle corporation tax have been proposed by HM Revenue and Customs.

The proposals are for a move towards a system based on the CO₂ emissions of a vehicle, and will have an impact on write-down allowance, balancing allowance and expensive car disallowance.

These allowances affect the amount that a business pays in corporation tax, as they have an impact on how much they can claim against their annual profit, realfd.net reported.

Writing for the site, Paul Harrop of Daimler Fleet Management UK noted that, if implemented, the changes would mean that some firms would have to pay hundreds or even thousands of pounds more tax every year.

For example, a business would be able to claim 10% of the opening value for vehicles which are above the 160g/km tax bracket, and 20% for vehicles below the 160g/km emissions bracket.

As such, a vehicle which costs £14,000 and has a CO₂ output of 170g/km would have an allowed depreciation of £1,400. Previously, this figure would have been £3,000.

Mr Harrop explained that "using these figures, and applying a corporate tax rate of 30%, the new rules result in an increase in tax for that year of £480".

The proposed changes to vehicle corporation tax are likely to become legislation in April next year.