Pre-Budget Report 2008 -Company car tax
R Russell
November 2008

Company car buyers should hold back on registering new cars until 2nd December. (The definition of list price uses the price list from the day before registration.) Then they should benefit from a 2.13% fall in list price and subsequent company car tax, unless the manufacturer puts in a quick price increase before then. This is because the chancellor has announced a reduction in the standard rate of VAT from 17.5% down to 15% for 1st December 2008 to 31st December 2009. It is unusual for one tax to be applied to another, so many people are surprised that a change in VAT can affect company car tax. For instance, changes in road tax and first registration fees do not alter company car tax. However businesses cannot generally reclaim VAT on car purchases, and the full list price is used as a standard measure in the calculation of taxable benefit for all cars up to a value of £80,000.

We expect list prices to get a bit messy on new cars in early December, as it will take the manufacturers a while to reissue official price lists on brochures, websites and pricing systems. In cases where we are unable to check in time, Comcar will assume that the prices of all cars and options will reduce in line with the lower rate of VAT on first December. Several brands may take this opportunity to revise prices. The poor state of the pound has put a great deal of pressure on European components and cars. Cars imported from the Far East may escape price pressure and could be reduced. Lexus for instance recently reduced some prices by around £1,000 whilst the Jaguar X-Type is going up by £500 on 1st January 2009.

Fuel prices will not fall despite the reduction in VAT as Alistair Darling puts an extra 2p in fuel duty on unleaded petrol and diesel simultaneously.

The other interest area for motorists is road tax. The Chancellor will maintain the new scales for next year on new cars, but has cut back and delayed the planned increases on older cars. A calculator guide will be on the site shortly to show these rates.