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Go green and save tax

publication date: May 21, 2007
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author/source: Jonathan Harvie
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greenThere’s an increasing trend in cars carrying estate agents’ logos, house style and contact details. As far as I know Foxtons were the first to do it with their fleet of minis. I can think of several other firms following the trend.

But now if you choose the right car you can write off the costs of the car IN FULL against your profits for the year!!! Sounds too good to be true – but it is! Under the scheme businesses can claim up-front tax relief on their capital spending up to 31 March 2008.

So what’s the deal? It’s really very simple. Provided you buy the “right” sort of car you can claim 100% first-year allowances on the cost of the car. So what’s the “right” sort of car? Well that’s simple too. The car has to be:

  • "unused and not second hand"
  • have CO2 emissions of not more than 120gm per kilometre driven, or is an electric car
  • the expenditure has to take place before 31 March 2008.

How does it work?

If you go out and buy a “normal car” your tax allowances would be limited to a maximum of £3,000 in the first year. The tax saved will depend on whether you are trading as an unincorporated business or through a limited company. It will vary between a £1,200 tax saving for a higher rate individual or partner to anything between £600 and £975 for a limited company.

If you buy a green car for say £10,000 you can write the cost of the vehicle off against your tax bill. The tax saving will vary between a £4,000 tax saving for a higher rate individual or partner to anything between £2,000 and £3,250 for a limited company.

A tax saving will mean more cash retained by you or your business. When the car is sold there may be a balancing charge dependent on the proceeds of sale.

What’s the choice?

Actually there’s a good choice of small cars. All the major manufacturers produce something that will fit the bill. These include Renault, Peugeot, Toyota, Smart, Audi, Vauxhall, VW, Honda, Citroen and a few others.

Green cars are cheaper for employees

It’s been getting more and more expensive for employees to be provided with a company car but the lower the CO2 emission rating the less the car will cost the employee in tax on benefits in kind. Provide your employee with a green car and assume a CO2 rating of 120 and the costs to the employee of having a fully expensed car really are reasonable.

Going green in 2007?

Of course I’m not suggesting that you go out and become a tree hugging hippie overnight but the thought of a fully sign written “green car” that saves you tax, helps your employees and promotes your business seems a worthwhile thing to do. Add the right sticker about your firm’s green credentials on the car and you’ll get even more brownie points with the public.

All in all that’s a pretty good reason for going green in 2007.

Jonathan Harvie is a Chartered Accountant, an Affiliate Member of the NAEA, a partner with Hazlewoods LLP, he heads a team of tax and business advisers, specialising in advice to Estate Agents. This article has been prepared as a guide to topics of current financial and business interest. We strongly recommend you take professional advice before making decisions on matters discussed here. No responsibility for any loss to any person acting as a result of this material can be accepted by us. For further information contact Jonathan Harvie on tel 01452 634800 or e-mail: jh@hazlewoods.co.uk

ESTATE AGENCY GOES ECO-FRIENDLY

Local NAEA member Perry Bishop and Chambers, has taken up the challenge to reduce its carbon footprint. Instead of opting for a gas guzzling executive car, Simon Fieldwick, Faringdon’s Listing Manager has chosen the Toyota Prius Hybrid as a new company car.

The car uses a combination of electric motors, battery power and a low emission petrol engine to dramatically reduce Co2 output and, in turn, the negative effects on the environment.

“With environmental concerns currently hot on most people’s minds, I decided to follow the example of reported eco friendly celebrities, such as Leonardo DiCaprio and Cameron Diaz by choosing the Prius” commented Simon.

“I am really pleased with its performance and its great to demonstrate how the company is considering its responsibilities on climate change.”

Other recent staff initiatives across the company include the recycling of all printing cartridges to support the local ambulance service as well as the recycling of shredded paper, being given away free of charge, as bedding for local stables.