NIC AND BENEFITS

The motor car will be provided throughout the tax year 2020/21, and will be leased by Smark Ltd at an annual cost of £27,630. The motor car will be petrol powered, will have a list price of
£80,000, and will have an official CO2 emission rate of 190 grams per kilometre.

The employer’s Class 1A NIC liability in respect of the car benefit will be £4,085 (29,600 at
13.8%).

The motor car has a CO2 emission rate in excess of 110 grams per kilometre, so only
£23,486 (27,630 less 15%) of the leasing costs are allowed for corporation tax purposes
.
Smark Ltd’s corporation tax liability will be reduced by £5,238 (23,486 + 4,085 = 27,571 at
19%)

QUESTION – what is the net benefist of providing the car

ANSWER IN THE TEXT – net of tax cost of £26,477 (27,630 + 4,085 – 5,238).

DOUBTS – isn’t the above answer wrong since the net tax cost should be net of tax cost of £2991 (27,630 + 4,085 – 5,238- £23,486{the capital allowance provided for the car )