Fleet News

Warning over diesel as BIK tax 'cure-all'

FLEETS are in danger of being carried away on a diesel 'magic carpet' in the false belief the fuel provides a failsafe solution to reduce drivers' tax bills, when they could end up paying more.

Many petrol-engined cars in the supermini, lower-medium and upper-medium sectors incur the lowest level of benefit-in-kind (BIK) tax at 15% of their P11D prices under the new carbon dioxide-based regime.

But while the lowest tax level a diesel can currently provide is 18%, because of a 3% tax supplement on cars powered by the fuel, drivers are opting for heavy-oil vehicles in the assumption they should pay less tax because of their cars' low carbon dioxide emissions.

Nigel Underdown, director of marketing at Godfrey Davis (Contract Hire), said: 'The explosion in diesel registrations, most markedly in the fleet sector, suggests that many organisations are adopting the diesel doctrine as a cure-all remedy to reduce drivers' taxation under the new tax system.

'But while diesels produce savings in some situations, it is by no means an automatic call - there are still numerous scenarios where petrol remains the most cost-effective option.'

Drivers and fleet decision-makers need to weigh up the value - in taxation terms - of a lower priced petrol-engined model with higher CO2 emissions against a lower emissions diesel with a higher P11D price.

'Employers restricting drivers from making sensible change have to re-evaluate choice policy', said Underdown.

Petrol-engined cars give BIK tax savings to drivers, although in the executive sector, a diesel model is more beneficial in tax terms.

However, while there may be benefits for the driver in using a petrol car, the employer may find its fuel bill suffering as a result, if the fleet has a large number of high-mileage drivers.

Underdown said: 'There are numerous factors to be taken into consideration when deciding on fleet make-up.

'The successful fleet will be the one that strikes a balance between driver needs and corporate requirements.'

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