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Think "green" when it comes to company cars

Company cars are becoming a more tax-efficient option for workers as manufacturers strive to expand their eco-friendly ranges, a Shropshire accountancy firm says.

"A few years ago, we were advising most of our company clients to take their vehicles out of the company and to run them personally," said Pam Mason, Tax Manager at Dyke Yaxley in Shrewsbury.

"However, with the list of vehicles with low emissions becoming more attractive, the time may have come when this is not automatically the best advice."

Company cars with lower emissions are seen as a much lower "benefit in kind", saving workers money on their tax bills.

The list of low-emission cars is growing fast, with most of the big brands, such as Audi, Ford, Renault and Volkswagen, having at least one eco-friendly model on their list.

Road tax is also cheaper for these cars, with an annual bill of £35 for cars with emissions between 101 and 110g/km, and no change at all if their readings are below 100g/km.

Company cars with CO2 emissions up to 120g/km are taxed at 10% of their list price if petrol driven, diesel cars carry a 3% loading - an Audit A3 1.6Tdi with a list price of £18,700 fits in this category, meaning the owner would be taxed on £2,431.

Pam said: "It seems that the motor industry has taken notice of the severe tax charges inflicted on the company car, and are trying to stem the tide which has seen companies turning their backs on providing such a benefit.

She added: "The thresholds for lower emission cars continue to be reduced as the Government pushes to reduce CO2 emissions.  So if Shropshire businesses are considering offering a more fuel-efficient fleet for their employees, they should research the options thoroughly.

"Companies may wish to consider not offering a fuel benefit alongside the company car - with fuel prices escalating, this could save the company significant amounts of money."

Pam Mason, Dyke Yaxley's Tax Manager