How will the corporation tax changes affect my fleet?

In general, cars become more attractive to lease than to buy under the new rules, due to the cost benefits offered by the new Lease Rental Restriction. In particular, cars that cost more than £12,000 and emit less than 160g/km of CO2 will be cheaper to acquire on Contract Hire from next April than they are at present. However, there is no "one size fits all" response to this tax reform. Every car policy will need to take account of the interactions between prices, depreciation, CO2 emissions, fuel costs, VED, corporation taxes, National Insurance, your business’s cost of funds and other important factors. Such an analysis will allow you to formulate the most advantageous policy based on a full and carefully considered analysis of the crucial variables.

2. Vehicle Excise Duty (VED)

The pre-Budget report confirms the introduction of new VED bands during 2009. However, it is worth noting that the Government envisages no significant rate changes until 2010, and even then, no driver in any given band shall pay more than £30 extra in that year.

Key dates:

– From April 2009, six new bands of VED will be introduced, taking the total to 13 bands. However, VED rates will not increase by more than £5 for any vehicle during this period.
– From April 2010, in order to create the desired environmental incentive, the Government will start to,separate out the 13 differential banding rates. As a result, cars below 150g/km CO2 will see a real terms VED cut of up to £30. Cars up to 175g/km CO2 will see no real terms increase and cars of 176g/km CO2 and above will see an increase of between £20 to £30.
– Also from April 2010, to "provide a stronger signal to consumers at the point of purchase," a differential first-year rate for new cars will be introduced (as announced in the 2008 budget). The more polluting cars will see their duty increased by a maximum of £30, (not £90 as originally planned). While the duty levied upon less polluting cars will stay, in most cases, the same or in some instances be reduced.

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