Don’t be surprised to cough up more tax on company cars

The manipulation of diesel emissions tests by Volkswagen could potentially impact UK cars and have a knock-on effect on the taxation of company car benefits, say London Chartered Accountants Blick Rothenberg LLP. 

The comment follows the admission by VW of manipulating diesel emissions tests in the US and Europe. 

Caroline Le Jeune, Partner at Blick Rothenberg, said: “Com- pany car benefits are calculated based on the list price and the approved CO2 emissions of the car, plus a 3% supplement for diesel cars. For any VW cars, this may well increase pending any revised CO2 emissions figures as a result of the upcoming investigations by US and German authorities.” 

She added: “For UK based employees with company cars, the taxable value of the benefit as shown on the employee’s P11d is likely to have been incorrect. Whilst there is no expectation of HMRC taking retrospective action in these highly peculiar circumstances, no official comment has been made. 

“Going forward, company car benefits are likely to need to be recomputed using the updated CO2 emissions figures, which will lead to higher taxable benefits for employees.”  

Le Jeune said: “It is not only employee P11d benefits that could be impacted, as tax deductions for businesses and companies for the costs of cars through capital allowances are also depen- dant on CO2 emissions levels. How a change in the CO2 emis- sions of cars will be treated by HMRC in this regard is unclear, as the calculations involved are complicated with each years’ deductions worked out on a reducing balance basis.”