Unfair tax system means drivers are taking the cash-for-car option
SIR – Is it really any surprise the number of people electing to pay tax on company car and fuel benefits is falling, and should we not be crediting the average ‘genuine’ business driver with more financial common sense?
Historically, company car drivers fell into one of two broad categories: those driving company cars to fulfil their job function and those where it was just part of their reward package.
The current regime is targeting the latter and is to the detriment of the former. Company car benefit ranges from 15% to 35% of the vehicle’s list price, which no-one in his or her right mind actually pays for the vehicle.
The vehicle then depreciates to be worth on average: 70% of the list price after 12 months, 55% of the list price after 24 months, and 40% of the list price after 36 months. So in a worst-case scenario, an employee of a company with a not unreasonable four-year replacement cycle could, during the fourth year, be paying tax on a figure that is greater than the vehicle’s value at that time.
How much more sensible is it for the genuine business driver to privately purchase a one or two-year-old vehicle with a proven reliability record and replace the same every two years?
With say 20,000 business miles per annum this costs the employer £6,500 (or less when the VAT element is recovered) in mileage allowance payments as a fully allowable expense. For the average company and business driver this represents a win-win situation, with no tax or National Insurance implications.
I appreciate there are psychological and other factors involved with the allocation of company vehicles, but my experience suggests that paying tax at 40% on a vehicle benefit that no longer represents good value for money can be very demotivating.
Alistair Whyte
Managing director, Hydracentre Wales
Shopping around for fuel can save huge amounts of cash
Sir – In response to your article ‘Turning your drivers into fuel bargain-hunters’ (Fleet NewsNet August 18), I get the impression that the seriousness and expense of this situation is being ignored by both company car drivers and fleet managers. You may create a report headed with the vehicle registration number, mileage, date, location, postcode, fuel type and cost per litre.
Through simple analysis you will quickly highlight the drivers who may be ignoring fuel costs, enabling you to manage the situation immediately and effectively. Drivers can also use postcodes in their satellite navigation systems to locate the cheapest fuel stations from which to make a planned purchase.
A typical fuel cost spread can be as much as 5.4 pence per litre. This is between the cheaper service stations, where they are competing for our business and the motorway and remote fuel stations where they are exploiting the situation.
These fuel cost variants can be crippling, so it is paramount for firms to react by taking action. Bargain hunting can make a huge difference on spiralling costs. Based on the company car national average annual mileage of 21,000 miles, I would be using approximately 2,016 litres of diesel.
At 90 pence per litre of diesel, it would equate to an annual cost of £1,814.40. If I increase this by a spread of 5.4 pence per litre, it would mean an increase in cost of £1,923.26, an increased annual difference of £108.86 per year, and an avoidable annual fuel cost increase of 6%. This is on a car that is averaging 47.47 mpg.
Chris Jager
Field sales executive, Chevin Fleet Solutions
Taxis just can’t compete with daily rentals
Sir – I was interested to read the response to the question regarding car rental costs (FNN Forum, August 4).
Taking a taxi was the suggested solution but is that really viable? Does anybody want to be sat in a client’s office waiting for their local cabbie to turn up? It is neither a professional nor flexible option.
Good car rental companies are reliable and can provide solutions where taxis simply can’t.
They will offer flexible pool car fleets and long and short-term rental solutions that will cover the most challenging variations in demand.
A rental partner should work with you to recommend any improvements in the way your fleet is operating. The provision of management information is crucial – it will help identify areas where greater efficiencies can be made and will allow vehicle provision to be tailored accordingly.
If this information can’t be provided the answer is simple – you’re with the wrong supplier.
Lorraine Farnon
UK sales director, National Car Rental
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