Fleet News

New tax system could save fleets £20 a month

FLEETS could save as much as £20 per month on the contract hire bill of a typical upper medium car under the new company company car tax system.

The saving stems from the opportunity for fleets to reduce the annual mileage thresholds of lease contracts as drivers no longer have an incentive to chase extra business miles in order to qualify for lower company car tax bills.

And if company car drivers cover fewer business miles, further savings will develop from lower corporate fuel bills.

Under the present company car tax system, drivers can reduce their tax bills substantially by exceeding 2,500 and 18,000 business mileage thresholds during the financial year.

But these tax breaks will disappear under the new carbon dioxide-based system, a step that the Inland Revenue believes will eliminate as many as 300 million business miles a year.

This could allow companies to reduce the annual mileage element of their contract hire agreements, according to Ian Tilbrook, managing director of ING Car Lease, thereby lowering monthly rental rates.

'Without the Government indirectly encouraging company car drivers to clock up miles, fleets will benefit from reduced rental rates,' he said.

A Fleet News mystery shop found that the monthly price difference between a three-year/ 60,000-mile contract and a three-year/45,000-mile contract is about £20 for a Ford Mondeo 2.0-litre Ghia, equating to a £720 saving over the contract period. Reducing the number of business miles covered will also reduce fuel bills, with 5,000 fewer business miles a year saving fleets £1,368 (based on a typical 35mpg, 2.0-litre petrol car with unleaded fuel costing 70.2p per litre).

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