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Taxation - Essay Example

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Taxation

Back in 2002, the government introduced new reforms on company cars. The company car tax reform encourages people to buy of choose cars with lower levels of carbon dioxide (CO2) emissions. Purposely, the reforms are aimed at tackling changes in climate and greenhouse gas emissions. Also, it also encourages manufacturers to introduce greener cars. As a result, businesses should evaluate their current fleet arrangements and especially those that emit carbon in order to minimize costs. The Government also aims at increasing its revenue (Melville 2012). It has already estimated additional cumulative tax revenue of c?3bn over five years if changes come to effect. The changes will affect three categories of people. To begin with, employers purchasing or leasing cars that are made available to their staffs for business and personal use. Then, employees provided for with a company car and fuel for private use. Changes on cars with private fuel benefits took effect as from April 2012 while changes on capital allowance and lease rental restriction consequences will take effect from April 2013 a. Changes on company car tax rates In the motoring industry, the government has announced for a further three tax years up to 2016/17. In years 2014/15, the appropriate percentage of a company car's price which is subject to tax will go up by 1% point compared to the previous years for those cars which emit more than 75g/km of CO2, to a maximum of 35% and by two percentage points, to a maximum of 37 per cent in both years 2015/16 and years 2016/17 (Melville 2012). In year 2015/2016, the special rates that exist for zero emission and ultra low carbon cars will be changed to 13% while in years 2016/17, the rate will be set to 15%. As from April 2016, supplement for diesel cars which is 3% will be removed. For company cars made available for private use, the government announced that specific security enhancements will be excluded as accessories for the purpose of calculating cash equivalent benefit. This change is already being applied as it took effect from 6 April 2011. b. Changes on Private fuel benefit As from April 2012, the multiplier for calculating the cash equivalent free fuel benefit on company cars provided to employees has been increased from ?18,800 to ?20,200. In addition, a further increase to this multiplier has been proposed by the government for 2013-14 by 2% above the rate of inflation. c. Changes on Capital allowances and lease rental restriction According to HMRC, first year capital allowance on the car expenditure which is usually 100% has its period extended by the government to April 2015. On the other hand, the threshold on emissions will decrease from 110g/km to 95g/km starting April 2013. Also, as from April 2013, the threshold for expenditure on cars to fall into the main pool which is 18% per annum, rather than the special rate pool of 8% per annum decreases from 160g/km to 130g/km. On lease rentals for cars with over 130g/km emissions, tax relief available to employers is restricted at 15%. On lease rentals for cars with over 130g/km emissions, tax relief available to employers is restricted at 15% (Melville 2012). d. Changes on Vehicle Excise Duty (VED) As from April 201 ...Show more

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Name…………………………………………………………………………….xxxxxx Institution……………………………………………………………………….xxxxxx Course……………………………………………………………………………xxxxx Professor………………………………………………………………………….xxxxx @2012 Taxation Q 1.1 General changes proposed for taxation of the company cars, for the company and for employees, for the next few tax years…
Author : schroederbrenno
Taxation essay example
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