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Budget reaction: ACFO asks are days of company cars numbered?

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By John Pryor, ACFO chairman

Is the Chancellor planning to kill the company car? It is a question fleet decision-makers and company car drivers could be forgiven for asking after Philip Hammond’s failure to announce the long-term shape of benefit-in-kind (BIK) taxation.

In the build-up to his statement, ACFO, along with leaders of other fleet and motor industry representative groups, met with HMRC, Treasury and Department for Transport officials.

It was widely expected the Chancellor would announce company car BIK tax bands and rates beyond those already known – up to the end of 2020/21 financial year.

However, he postponed any announcement until next spring.

Furthermore, despite intensive lobbying, he ignored calls to perform a U-turn on company car BIK tax increases for zero and ultra-low emission vehicles in 2019/20 and 2020/21. That came on top of a pre-Budget announcement cutting the plug-in car grant.

From a fleet decision-maker and company car drivers’ perspective the Budget provided absolutely no clarity and no basis for long-term planning, and further undermined the Government’s ‘green’ agenda.

Indeed, by failing to make BIK announcements, Hammond has further fuelled the demise of the company car.

Figures published by HMRC already highlight a long-term reduction in the number of company car drivers and, simultaneously, a significant rise in the amount of tax paid by employees remaining loyal to what was once seen as arguably Britain’s favourite employee perk.

As, specifically, perk drivers opt for cash instead of a car they will use that money to fund a vehicle that is older and less environmentally-friendly than the company car they were entitled to.

Six months – until spring 2019 – may not seem a long time, but for businesses and drivers it is long enough for some to conclude that company cars are history.

Will Hammond be the Chancellor who killed the company car? ACFO hopes not.

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  • rosco7 - 20/11/2018 11:48

    This is a really pertinent question. In my opinion the answer is different depending on the type of employee. I think the "perk" company car is going to die over the next few years. The tax cost for a 40% tax payer to be in receipt of almost any car is a significant deterrent. Those with a benchmarked allowance can get a better car, insured, maintained and with fewer restrictions by taking the cash allowance and using it towards a PCP, PCH or even a carefully financed purchase. Why would the employee be net worse off, and be in a potentially lower specified vehicle. As for those with very high mileage, or 20% tax payers driving job essential cars, I think there is still a requirement.

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