The company car; for some it is an employee perk while for others it is an essential part of their salary package.

But new tax rules, due to come into effect on 6 April, could change how we view company cars and force many workers to pay extra tax.

The rules will introduce a new and crucial difference in the way tax on these cars is evaluated.

As we stand

At the moment your company car is taxed as income worth 35% of its value and you get a discount depending on how many miles you drive.

If you travel more than 2,500 a year, you are taxed at 25% of the list price.

Drive more than 18,000 business miles and the amount to which tax is applied drops to 15%.

Then it depends on whether you pay tax at the basic rate of 22% or the higher rate of 40%.

So if you are a higher rate taxpayer driving a car worth �10,000 and drive more than 18,000 miles a year, you will be taxed �600.

Going green

But all that is about to change.

From 6 April 2002 taxation will be based on how much carbon dioxide your vehicle produces.

The cleanest cars, which produce 165g or less of carbon dioxide per kilometre, will be taxed at 15% of their value.

Each extra 5g per km will add 1%, until you get to a maximum of 265g per km when you reach the maximum 35% of your car's value.

The 22% and 40% tax rates will then apply, whatever your carbon dioxide levels.

Just the beginning

But this is just the start. Things will get tougher in following years, with the pollution threshold dropping to 155g per km in 2003 and then 145g per km in 2004.

So the emphasis now will be finding company cars that have low emissions.

"In total, the changes should raise the same amount of tax, about �1.5bn," says Alastair Kendrick of accountants Ernst & Young.

"But the real winners are the perk users, particularly those in low CO2 emission cars.

"The losers are the essential business car users doing more than 18,000 miles, especially in heavy CO2 emission vehicles."

For Example

Let's look at a couple of examples.

A Ford Mondeo driver in the 40% tax band who pays �906 now will pay �1,208 in the next tax year.

A higher rate driver of a BMW 525i will go from �1,591 to �2,863.

But the driver of an environmentally sound Peugeot 206 could see their tax bill fall from �1,368 to �1,040.

Ignorant

Business organisations say the new regulations ignore the fact that cars are vital to some workers.

They believe small companies will swap new cars for less green second-hand models, saving money but defeating the government�s objective of cutting emissions.

The Society of Motor Manufacturers and Traders (SMMT) say they have noticed a shift in what cars are being purchased.

There are fewer gas guzzlers and more cars like the Ford Focus with good green credentials.

Super minis are also becoming more popular as fleet cars.

Diesel drive

And sales of diesel cars, in decline for years, are rising.

In Europe about 30% of cars are diesel. It was just 13% in the UK, but is going up fast.

Alastair Kendrick says companies should get their calculators out now if they haven't already.

"They should look at what impact these changes will have on their fleet and recognise which employees will be winners and losers," he advises.

"Employees left out of pocket should be given some options. They could swap the car for a cleaner one or give the employee a cash alternative.

"Employees should also be looking at how it will impact and talking to their employers to see what will happen and if they need to work out a solution."

To see how clean different models are, look at the SMMT website or the Vehicle Certification Agency site - the links are on the right of this page.