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Company cars: Tax strategy puts benefit at risk

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Martin Evans discusses why he thinks the Governments tax strategy is putting the future of the company car at risk. 

The Government’s current company car benefit-in-kind (BIK) taxation strategy is in direct conflict with its ambitions to ‘clean up’ the UK.

Data suggests that in 2017 the corporate share of the UK new car market is running at 54%.

It can also be assumed that for many marques, particularly the prestige brands, fleet and business car registrations account for a significantly greater market share.

Yet, the Government continues to increase BIK rates, while pumping hundreds of millions of pounds into trying to encourage demand for plug-in vehicles.

Even more bizarrely, the Government then wants to slash the tax burden on electric vehicles in 2020/21.

Consequently, I find it incomprehensible that many employees are likely to choose plug-in vehicles as company cars in the near future, with many question marks remaining over the technology and the recharging infrastructure.

Therefore, as employees’ tax liability increases, I fear that many will decide a company car no longer delivers value and will give them up. 

They will buy or lease their own car and move into the murky world of grey fleet. These are typically, older and more polluting cars that are alien to air quality objectives, allied to a greater requirement for employers to manage all the well-documented health and safety risks that such a move triggers and the potential to clock up unnecessary mileage in pursuit of reimbursement claims to supplement salary.

History tells us company cars are a vital employee recruitment and retention tool. They also put employers in control of the make, model and age of vehicles operated as well as the safety risk posed, while contributing to a company’s image and reputation when compared to a polluting old car.

I believe the Government’s tax strategy is putting the future of the company car at risk and that will have a dramatic impact on UK new car registrations and the entire automotive industry, not to say businesses as a whole. 

A wholesale review of company car tax is required recognising the key role those vehicles play in terms of improving overall air quality and road safety.

By Martin Evans, managing director of Jaama

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  • Bob the Engineer - 24/07/2017 17:00

    Will people move to grey fleet? I thought HMRC was planning to go after car allowance drivers to and compare standard tax to a BIK company car bill, charging the driver whichever is the highest! - there is no escape the madness.. apart from get an office job and the bus I suppose.

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