Fleet News

Company car tax: countdown is over

THE new carbon dioxide-based company car tax system begins in two days' time, marking the end of three years preparation for the fleet industry and the start of a new challenge, experts warn.

While the first hurdle of preparing for the new tax has been successfully cleared by most companies, they now face a year of juggling demands from drivers as the true impact of the taxation changes hit home.

Although research has shown that the majority of drivers are aware of the changes to company car tax, tens of thousands do not understand how much tax they will actually pay on their company vehicles.

Research by Lex Vehicle Leasing across its 100,000-strong fleet indicates that 70% of drivers will be better off from April 6, the start of the new system. However last month, research revealed hundreds of finance directors and managing directors had yet to assess the impact of the system on their firms' finances.

Fleet consultancy Fleet Logistics discovered the heads of just 63% of companies felt they had sufficient information about the changes, in other words nearly one-third are still unprepared.

Experts examining the potential effects of the new system predict a whirlwind of change over the next few months, with company car drivers opting out or downsizing, while some perk car drivers penalised under the 'old' tax system will opt back in.

A spokesman for the Inland Revenue said it had no reason to alter its forecast of an extra 200,000 company cars on UK roads as a result of the benefit-in-kind tax changes. Rael Winetroube, sales and marketing director of DaimlerChrysler Services Fleet Management, said: 'The outcome of the new tax regime will be an increasingly diverse profile for many fleets, with more than one funding option being employed, including personal schemes.

'However, I think we can see that the opting-out panic is calming down now and if fleet policies allow for a wider choice, there will be few who lose out under the new scheme.'

If the likelihood of greater flexibility in fleet choice lists is higher, the chances of company car drivers negotiating higher salaries or compensation to cover any increase in benefit-in- kind tax are extremely remote.

Research by the Fleet News Fleet Panel found that 98% of employers had no intention of 'bailing' out staff for tax rises.

Yet fleets looking to protect their drivers from the new tax system, and shelter them from future changes, are looking towards alternative funding structures.

Multi-marque leasing company Alphabet forecasts that by 2007 up to a quarter of Britain's company car drivers could become owner-drivers as their employers adopt structured employee car ownership plans that see drivers own their cars, thereby avoiding BIK taxation.

Despite the new challenges ahead, more than half of all fleet managers believe there is no need for specialist fleet training or qualifications.

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