The review has expanded from looking solely at employee car ownership schemes (ECOS) to a wider brief, thanks to arguments from the fleet industry that it is impossible to look at one without the other.
The announcement of the ongoing review into ECOS by Her Majesty’s Revenue and Customs (HMRC) was made in the pre-budget statement at the start of this month, but the level of detail it will go into has surprised many.
It will look at if, why and how the composition of fleets has changed in the last year, the factors that have contributed to employees opting out and the influence tax has had in their decision, if there are administrative difficulties with company car tax and the effect of mileage allowances.
ACFO spokesman Stewart Whyte said the review was good news for the industry.
He added: ‘ACFO has been calling for the government to recognise that there is a symbiotic relationship between company car tax, mileage allowances, taxation and ECOS, and we are delighted that this will now happen.’
Key to the review will be mileage rates and how they are structured, as they form an integral part of ECO schemes.
Critics also claim at present that the mileage allowance system is over-generous and encourages drivers to notch up high mileages to make money.
Potentially, mileage rates could be linked to emissions, but this could cause significant administrative difficulties.
Tax expert Alastair Kendrick said: ‘It appears that HMRC is wanting to consider how to encourage ‘green’ travel and realise that the payment of a single mileage rate irrespective of the CO2 emission of the vehicle may not help the position.
‘It is clear, though, that HMRC only has a limited way in which it can possibly proceed in this area. The introduction of a number of mileage bands may be considered a simple solution but would create significant red tape.’
HMRC has five discussion sessions in January and is asking for interested parties to get in contact. However, the timing of the discussions at the start of the month has given little time for interested parties to react.