Company cars about to fall out of favour

• 130g/km of CO2 is a key benchmark for company cars
• Allows companies to claim more of a car’s cost against tax
• Five surprising cars which fall foul of the limit

Written by Julian Kirk Published: 23 April 2013 Updated: 23 April 2013

The recent Budget introduced new tax rules which make it harder for companies to off-set the cost of company cars against their tax bills.

Cars which emit 130g/km of CO2 or less will benefit from the ruling as they qualify for an enhanced writing down allowance – a statutory tax deduction for depreciation which is now linked to a car’s CO2 emissions.

They qualify for 18% of their value to be off-set against tax, while cars with CO2 emissions of 131g/km and above can only have 8% of their value offset against corporation tax.

Therefore, companies stand to recoup more than double the amount on a car with CO2 emissions lower than 131g/km compared with a similar car with higher emissions.

The knock-on effect will be that cars emitting 130g/km and below will be more popular, while those above the threshold may lose popularity thanks to the tax changes, and as a result may attract higher leasing rates.

Five surprise cars that fall foul of the 130g/km threshold:

1. Ford Focus 1.6

Parkers says:

The new Focus is a great all-rounder with solid build quality, a fine chassis, comfortable ride and solid handling. It also offers a wide range of efficient engines, including the novel three-cylinder EcoBoost 1.0-litre petrol and the acclaimed TDCi diesels. However, the 1.6-litre petrol engine falls foul of the 130 limit, emitting136g/km.

CO2: 136g/km

MPG: 47.9

Fuel: Petrol

2. Audi A3 1.8 TFSI

Parkers says:

A fine car with understated good looks and a beautifully built and designed cabin, the new A3 is a key user-chooser car. However, the 180bhp 1.8-litre petrol engine allied to a manual gearbox doesn’t make the grade here – although opt for the same engine with the S-tronic auto and it emits 130g/km.

CO2: 135g/km

MPG: 48.7

Fuel: Petrol

3. BMW 3 Series ActiveHybrid3

Parkers says:

While for many manufacturers a hybrid is a headline low emission car, for BMW that isn’t the top priority. The ActiveHybrid 3 delivers more than 300bhp so suffers as a result with higher emissions and lower fuel economy than its sub-130g/km diesel stablemates.

CO2: 139g/km

MPG: 47.9

Fuel: Petrol/Electric

4. Volvo S60 T3

Parkers says:

While diesel may still be king in the company car market, a growing number of lower mileage drivers are switching on to the fact that they may not need a (more expensive) diesel. Volvo’s T3 petrol model just misses out on the 130g/km limit.

CO2: 135g/km

MPG: 48.7

Fuel: Petrol

5. Range Rover Evoque eD4 5dr

Parkers says:

While the three-door, front-wheel drive Coupe version of the ultra-desirable Evoque scrapes in just under the 130g/km limit, the five-door version which shares the same engine and six-speed manual gearbox doesn’t – it is classed at 133g/km of CO2.

CO2: 133g/km

MPG: 56.5

Fuel: Diesel