The UK government is abolishing the Qualifying Low Emission Car (QUALEC) tax rate for company cars from the 6th April 2012. It is estimated that currently around 45% of new car orders currently fall into the QUALEC tax band. This article explains what a QUALEC is and how the changes could affect company car drivers and fleet managers.
A QUALEC is defined as a car that was registered on or after 1st Jan 1998 with CO2 emissions not exceeding the statutory limit of 120 g/km. The rate of company car tax for QUALECs is 10% for 2011/12 unless the car has emissions below 75 g/km in which case the rate is 5%. For cars with zero emissions there is no charge.
On the 6th April 2012 the QUALEC category will be no more resulting in an increase in the tax rate for cars between 100 and 120 g/km. From 2013/14 the charges will increase by a further 1% for cars with emissions between 76 and 99 g/km.
From an employer's point of view, this will mean an increase in Class 1A National Insurance costs on a scale charge of cars with between 100 and 120 g/km as a result of the increase in the relevant percentage used to calculate the scale charge. The scale charge can be calculated by multiplying the list price of the car plus options, less any capital contribution from the driver, by the relevant percentage based on CO2 g/km.
From the employee point of view, drivers of cars with emissions between 100 and 120 g/km will have to pay more Benefit in Kind (BIK) tax as this is calculated using the scale charge.
These cost increases apply to all cars on the road, not just new ones that are ordered or delivered from the 2012/13 tax year.
In summary, if you're an employer with a large number of vehicles with carbon dioxide emissions of less than 120 g/km you should make sure that you're aware of how CO2 emissions effect the Class 1A National Insurance contributions for the term of the car. There are very few fleets operating entirely sub 99 g/km vehicles so it's important to take action now in order to mitigate the effects of these changes. Most company car leasing periods run for 3 or 4 years and with these changes affecting both new and existing vehicles, prompt action could prevent headaches in the near future.
Vehicle Save UK offer car rental, long and short term car leasing and contract hire to personal and business users. Vehicle Save are experts in company car leasing matters and will be happy to discuss any concerns regarding the forthcoming changes to the QUALEC leasing category.