Fleet News

Tax: Company car tax and the SME driver

By Paul Parkinson, managing director of Synergy Automotive, and member of the BVRLA National Leasing Broker Committee.

Some of our clients understand the financial impact of vehicle selection, and/or opting in or out of their company vehicle; others have little or no understanding of current and future tax implications. 

Further compounded by sharp rises in BIK tax liability, a growing number of what would be described as company cars are now funded privately by drivers on personal contract hire and personal contract purchase schemes. Typically, these drivers are owners/directors/partners of SME businesses - with a growing number of their employees now offered, and opting for, a cash allowance. 

Manufacturers are working hard to drive down CO2 emissions and the Chancellor needs his pound. With the majority of contract hire and leasing providers now equalising rental costs for business and personal users, more SME drivers are moving towards personal arrangements. This is verified by a 44% increase in personal contract hire in the last year. 

As a member of the British Vehicle Rental and Leasing Association (BVRLA) delegation meeting with HMRC to discuss the future of company car tax, hosted by KPMG, on December 4, I am looking forward to a lively debate from all parties. 

We see businesses with flexibility looking at not only creative schemes designed to reduce BIK tax, but also their immediate fleet risk. 

As technology and range improves for hybrid and electric vehicles there is an opportunity for the government to extend its OLEV grant, further incentivising these as company vehicles. 

Another possibility to fairly tax the business use of company vehicles might include telematics and pay-as-you-drive models.

I understand that, based on business mileage research, the BVRLA is currently lobbying the government to adjust the amount of blocked VAT payable on a company vehicle with some personal use from 50% to 40%. 

Perhaps another option would see blocked VAT charged on a sliding scale, calculated on a business use declaration. 

The task for the industry and government is to achieve a scheme that is easy to administrate and transparent in its costs for both companies and drivers. I think now is the time for businesses to be encouraged to dobusiness and to be taxed fairly. 

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