With just days to go before Chancellor of the Exchequer Gordon Brown reveals his 2004 Budget, ministers are being warned of the dangers of simply increasing taxes each year.
Association of Car Fleet Operators director Stewart Whyte said: 'It is clear the Government is very supportive in general of company cars. However, it is also now clear that if the Government makes benefit-in-kind tax too penal, even more employees will seek to opt out of the traditional company car arrangements.
'Anecdotal evidence from fleet managers has consistently suggested that when staff give up their company cars, the majority elect to drive models which are older and less environmentally-friendly than if they had stayed loyal to their company cars.'
He said that in many cases, the carefully-constructed allocation policies are being abandoned, with many drivers anxious to trade up in power, size and fuel consumption.
Whyte added: 'We believe that while company car fleets are generally becoming cleaner due to advances in vehicle technology, the results of our latest survey will confirm that employees taking cash or a PCP are not choosing the newer, cleaner cars in the showroom, but are instead opting for older and therefore less environmentally-friendly vehicles.'
ACFO is calling on Brown not to increase company car tax for 2006-07 beyond the level he has already announced for 2005-06.
Whyte said: 'If the Chancellor of the Exchequer drives the company car tax burden up much further, employees will drive out of company cars and take the cash option or PCP-style alternative offered by their employers. If that happens it will destroy the Government's 'green' fleet ambitions.'
ACFO will be using the survey results to put last-minute pressure on the Treasury to freeze tax rates.
Preliminary findings from the survey were presented to the Inland Revenue at a recent meeting last month and comprehensive results will be sent to Economic Secretary to the Treasury John Healey.
Brace yourselves, fleets warned
FLEETS should expect major changes to some areas of benefit-in-kind taxation, despite the call for a company car tax freeze.
ACFO warns that the current flat rate £500 charge for private use of vans (£350 if the van is four years old) could be scrapped in favour of a scale charge, with no reduction for older vans. It is expected that it could be around double the current charge.
The second element will be a fuel scale charge, which will be paid by drivers who use company-funded fuel privately. Until now, this has been included in the £500 annual charge.
ACFO is also pushing for a revision to the Inland Revenue's tax-free mileage allowances system (AMR).
Currently, employees using their own cars or vans on business can claim up to 40p a mile tax free on the first 10,000 miles clocked up and 25p a mile tax free thereafter. ACFO wants to see the 10,000-mile threshold lowered to avoid drivers covering unnecessary business mileage.
Discussions have also taken place between fleet industry representative bodies and the Government that could see a three-year Vehicle Excise Duty licence being launched specially for fleet vehicles.
The administration-reducing idea would enable a fleet vehicle to be taxed from new until the time it required its first MoT.
An Inland Revenue spokesman said: 'We have met with representative bodies. However, we cannot say what changes are planned. It is a policy decision for the minister to take.'