3 Damian is the finance director of Linden Limited, a medium sized, unquoted, UK trading company, with a 31 Julyyear end. Damian personally owns 10% of the ordinary issued share capital of Linden Limited, for which he paid￡10,000 in June 1998. He estimate

正确答案：
(a) (i) Individual salesmen
The taxable benefit is determined by the list price of the vehicle plus the cost of the accessories (￡20,000) and the CO2
emission rate. The current vehicles have a CO2 emission rate of 168 grams/kilometre, so the benefit will be calculated
at the rate of 20% ((168 – 140)/5 + 15), resulting in a total annual car and car fuel benefit charge of ￡6,880 (20,000
x 20% + 14,400 x 20%). The low emission vehicles will be chargeable at the basic percentage rate of 15% resulting
in a total annual car and fuel benefit charge of ￡5,160 (20,000 x 15% + 14,400 x 15%). The salesmen will thus
make an annual income tax saving at their marginal rate of tax, i.e. ￡378 (1,720 x 22%) if they are basic rate taxpayers
and ￡688 (1,720 x 40%) if they are higher rate taxpayers.
Linden Limited
The current vehicles will be classed as ‘expensive’ cars based on the discounted list price plus the cost of the accessories
of ￡18,824 (19,600 x 94% + 400). The annual writing down allowances will thus be restricted to ￡3,000 throughout
the period of ownership, but there will be no restriction of the balancing allowance available on disposal. The low
emission vehicles will be eligible for a 100% first year allowance of ￡19,020 (19,600 x 95% + 400), but there will
also be a balancing charge on disposal equivalent to the sales proceeds. Therefore, the total of the allowances available
over the life of the cars will be effectively the same in both cases. As a single company with taxable profits of
￡1·4 million, Linden Limited will pay corporation tax at the small companies marginal rate of 32·75% in the year to
31 July 2007, giving a tax benefit in that year of ￡5,247 for each low emission car purchased ((19,020 – 3,000) x
32·75%).
The company will also make an annual saving in terms of the Class 1A national insurance contributions payable on the
salesmen’s benefits of ￡220 ((6,880 – 5,160) x 12·8%). But, as these Class 1A contributions are deductible for
corporation tax, the net saving will only be ￡205 (220 x (100 – 32·75)%).
As the VAT liability payable on the provision of private fuel is based on engine capacity (not the CO2 emission rate) this
will not necessarily be affected.