What price a used Scaglietti?
Running a used supercar on a company is going to get very painful financially from 6 April. In fact business folk who like their prestige cars could find themselves paying more in tax per year than the cars are worth.
It's all down to one of Labour's final flings against wealthy car enthusiasts introduced quietly in 2009 by then Chancellor Alistair Darling, but only taking effect now.
Under the present system company owner directors, and top execs in generous company car schemes pay a maximum income tax of £14,000 a year plus their companies national insurance of £3,584.
But from the new tax year the £80,000 maximum list price used to assess the tax will be replaced by a car's actual list price when new, even if the car is now three or four years old. An added sting is that it will include accessories also at list price. Suddenly that £4,000 transparent engine cover doesn't seem such a good idea if it alone will cost you £700 a year in tax.
For some drivers it will be a severe test of their commitment to prestige motoring and some dealers expect a definite dip in used car prices if enough people bail out, even in the short term.
Ferrari 612 Scagliettis, rightly some would say, are a rare sight on the road. But take the list price of about £222,000 and Mr or Mrs Successful Business Person would now pay income tax of almost £39,000 per year and the employer a charge of more than £10,000 for Class 1A National Insurance.
How about £39k pa plus NI?
The total tax bill for 2011-12 of nearly £50,000 is an increase of 182% compared to the current tax bill.
David Heaton, Employer Consulting Partner at accountancy and business advisors Baker Tilly, says: "Drivers rewarding themselves with second hand supercars need to be particularly careful because HMRC will charge car benefits on the list price.
"Removing the £80,000 maximum list price is an easy hit as it affects a select group of wealthy drivers.
"The tax hike was described by Alistair Darling as ensuring drivers of expensive cars paid a 'fair level of tax', but the result is more likely to be the disappearance of the supercar from companies.
"The super-rich won't worry but drivers of older company-owned supercars could be caught out. You can pick up a 2005 model Ferrari Scaglietti for about £65,000. But the company car tax bill of £39,500 of tax and NICs per year to drive a car worth £65,000 is not very attractive."
A random £5k Rangie in our classifieds
And it's not only exotic car drivers who will be hit. Owner managed businesses where partners drive top of the range BMWs, Bentley, Mercedes and Range Rovers will also face big bills. Heaton knows of one chap facing car and fuel benefit costs of £9,000 a year for his Range Rover even though its book value is now just over £5,000.
"The problem is its list price of £51,000. It would be cheaper to give the man the car and pay less tax."
It's impossible to know how many people will have to take their cars into personal ownership to avoid the tax but several top end car dealers confirmed that many of their clients bought their cars on their companies.
"People love their cars. Owning them outright might take a bit of getting used to but I don't think they will give them up," said one.
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