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FERRARI OR FIAT 500 By: Gordon

From 6 April the price cap used to calculate the income tax paid by company car users has been removed.

Currently, owners of luxury cars have to pay tax based on a sliding scale determined by the level of CO2 emissions, on the first £80,000 of the value of their car. This can be up to £14,000.

From 6 April 2011 the tax will be calculated on the car’s full list price value when new, however old it is.

Anyone who has a company car worth more than £80,000 and has private use will either have to trade down or buy privately and claim business mileage if they want to avoid the higher tax charges.

As the price that is relevant is the new price don’t think that buying a luxury car or a supercar second hand will avoid the problem. A 2005 Ferrari 612 Scaglietti F1A can be bought for £65,000 but the tax is based on its list price of £177,000 when new, resulting in a tax charge of £31,000.

Maybe a Fiat 500 is becoming an attractive alternative, even before you consider the price of fuel

If you need any guidance on the tax position before 6 April 2011 please contact Haxton, Chartered Accountants West London

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