A £100 million hole could be blown in the Government's finances as more than 100,000 company car drivers take up cash- for-car schemes, a leading professional services firm is predicting. PricewaterhouseCoopers estimates that 130,000 company car drivers could sign up to tax-efficient structured personal contract purchase schemes in the next few years. With the average driver incurring a tax charge of about £880 a year, this would starve the Inland Revenue of £114 million a year.

The Government has already predicted a tax loss of £100 million from the introduction of CO2-based company car tax in 2002 as the majority of drivers will see their tax liability fall. But the latest revelations could double these losses to more than £200 million.

The Inland Revenue estimates there will be 200,000 extra company car drivers within a couple of years of the introduction of CO2-based company car tax in 2002 and it is standing by its estimates.

PricewaterhouseCoopers believes the face of the company car market could be changed forever by rocketing growth in demand for the tax-saving schemes which can provide the equivalent of a company car, without the benefit-in-kind tax burden it normally brings. Most demand will come from high mileage drivers, who currently pay just 15% but face rocketing tax bills under the new CO2 tax regime.

PricewaterhouseCoopers is in talks with 200 companies which have shown interest in launching structured personal leasing schemes - including 100 with fleets of more than 100 vehicles. In 1998, PWC signed a strategic alliance with Abbey National-owned Whitechapel, creator of the innovative Whitechapel employee car ownership scheme.

John Mills, PricewaterhouseCoopers, partner responsible for car scheme advisory services, said: 'Structured personal leasing schemes will change the face of fleet forever. The market is changing already and we are seeing current fleet providers reacting to the potential savings available.'

Whitechapel claims companies can save £1,000 per car, although Mills admitted that the potential savings had to be considered on a case-by-case basis, with significant savings obtained for fleets of more than 100 vehicles. He also dismissed concerns that the scheme could fall victim to sudden changes in legislation, claiming a wholesale reorganisation of the tax system would be needed to block the path being considered by hundreds of companies.