The introduction of carbon dioxide-based company car tax will remove tax incentives for drivers who cover high business mileages, which could provide a £300 million windfall from reduced costs.
But the changes could also encourage employees to consider alternative forms of transport, such as the train, meaning firms are effectively paying twice to keep their staff on the move.
Godfrey Davis (Contract Hire) has warned that employers will need to police business travel patterns, especially when business mileage tax incentives for company car drivers disappear next April.
'It is no secret that many drivers choose to use their company cars for journeys where other forms of transport make better sense, solely to ensure they crack the 18,000 business mileage band,' said Nigel Underdown, director of marketing at the leasing firm.
This incentive to use the car at all times will evaporate from next April under the new carbon dioxide emissions-based company car tax system that offers no concessions for high business mileage. As a result, many company car drivers may follow the Government's steer and switch to public transport for certain journeys.
'While using public transport may seem a sensible and responsible alternative, employers need to be alert to the danger of drivers abusing this convenience and taking the train or plane or even hire cars for self-interest as opposed to practical business reasons,' said Underdown.
'If such situations are not effectively managed and policed, employers could find themselves effectively paying twice over for a journey - once with the provision of the company car, secondly with the train fare.'
He advised employers to draw up guidelines for staff in time for April 2002, and to pay special attention to staff who have opted for a cash allowance in lieu of a company car.
When employees start to own their cars, they are likely to be far more reluctant to put business mileage on them, said Underdown, adding that staff could then consider more costly travel options. As a result, journey costs mile-for-mile could rise.