Downsizing to save tax

REDUCING business mileage is low on the agenda for most UK fleets but more than 40% expect their drivers to downsize into smaller cars in response to the company car tax regime, a new report has shown.

Only 17% of fleets currently operate a policy for mileage reduction, with other business pressures getting in the way of smaller operators encouraging their drivers to cut their business travel, according to the HSBC Business Car Expectations survey.

Furthermore, the 41% of survey respondents expecting company car drivers to choose smaller models was less than the 46% in last year's study.

The report said: 'Maybe there is a message here. Could drivers be willing to take the hit to protect image, to retain comfort in increasingly aggressive and deteriorating traffic conditions, or are recipients of business cars seeking to manage the new BIK rules by switching to diesel?'

A further issue of interest is the likely future take-up of the cash alternatives to the business car, now the BIK changes have largely filtered through to the market.

The survey also found that 65% of respondents were expecting a growth in the number of diesels on their fleets in response to 2002's benefit-in-kind tax changes (see below). This share was greater than in the previous survey, when the expectation was 62%.

The report said that from an environmental, social responsibility and cost-reduction viewpoint, reducing business mileage was a policy to be lauded. Respondents were asked, as in previous years, whether their organisations had a policy for mileage reduction.

The report said: 'The responses show that 17% of respondents have such a policy and it seems likely that other business pressures are stopping, or discouraging, smaller operators from reducing business mileage.'

The survey found that 91% of business drivers are aware of the benefit-in-kind tax changes introduced in April 2002, which tax drivers on their cars' emissions.

A spokesman for HSBC commented: 'The benefit-in-kind tax system is still high on the agenda. It is, however, having a positive effect.

'Fewer miles are being travelled in higher-numbers of cleaner vehicles, with diesel the fuel of choice rather than other alternative fuels. The increase in diesel cars on HSBC's fleet will contribute to an 85,000-tonne reduction in CO2 emitted by the fleet.

'The trend in the switch to diesel looks set to continue. There has been some element of downsizing, from upper-medium to lower-medium cars – for example, to the Ford Focus, which is the petrol car ordered most frequently by our customers.'

Likely impact of bik taxation changes on diesel car numbers


Fleet size	More	Same	Fewer	Survey responses
1-10	47%	51%	2%	101
11-19	69%	29%	2%	62
20-49	67%	33%	-	102
50-99	79%	21%	-	43
100-249	69%	31%	-	35
250-499	86%	14%	-	14
500-999	82%	9%	9%	11
1,000+	82%	6%	12%	17

Source: HSBC Business Car Expectations

Likely impact of 2002 changes to BIK tax on business car sizes


Fleet size	Larger cars	No change	Smaller cars	Survey responses
1-10	1%	57%	42%	103
11-19	-	68%	32%	62
20-49	2%	58%	40%	103
50-99	2%	58%	40%	43
100-249	6%	57%	37%	35
250-499	-	36%	64%	14
500-999	-	55%	45%	11
1,000+	-	35%	65%	17
Total	2%	57%	41%	388