Fleet News

New tax to generate £300m windfall for fleet operators

THE UK fleet industry is set to receive a £300 million windfall when the new benefit-in-kind system is introduced, a new report suggests.

These savings will stem largely from lower fuel bills as company car drivers cover fewer business miles.

Under the present benefit-in- kind tax system there has been a persistent sense that drivers have chased 'unnecessary' business miles to qualify for the tax discounts available at 2,500 and 18,000 business miles.

The Inland Revenue believes the switch to the emissions-based company car tax system next year will reduce annual business mileage by up to 300 million miles.

But its forecasts are dwarfed by the findings of a new survey of 221 company finance directors interviewed by leasing and fleet management company Alphabet.

These finance directors estimated that on average 18 per cent of business miles clocked up by their company car drivers were 'unnecessary'.

Extending this proportion across the national company car park suggests that of the 17.5 billion business miles driven annually in the UK, 3.1 billion miles are unnecessary.

Assuming the average company car returns 30 miles to the gallon, these 3.1 billion miles account for more than 105 million gallons of fuel, at a cost of £340 million.

But there will still be a danger under the new CO2-based tax system that employers pay for unnecessary business miles, even if the tax breaks disappear, because many companies are considering new company car ownership programmes.

Several of these schemes pay drivers a cash allowance to fund and technically own their 'company' cars, with these cash allowances paid partly through business mileage reimbursement using the Inland Revenue Authorised Mileage Rates.

From next April the IRAMR allows employers to reimburse staff using their own cars on business up to 40 pence per mile, tax free and National Insurance free, creating a new incentive for drivers to chase excessive business mileage.

Alphabet is urging employers to take more management control of business mileage, with chief operating officer Mike Baldry saying: 'Apart from monitoring company car drivers' mileage, fleet decision-makers must encourage video conferencing and better journey planning among drivers.'

He added: 'The tax change looks as though it will have much more far reaching effects than fleets originally expected. Those that have not set up a policy review need to do so sooner rather than later.'

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