Fleet managers attending the Hit for Six South Conference in Oxford last week heard that two key areas of taxation will bring a combination of threats and opportunities to fleet operators that require expert handling.
Firstly, fleets are being urged to start planning now for the new 10% benefit-in-kind tax band which comes into force in the 2008/2009 tax year from April.
The new low tax band, a 25% reduction on the current lowest band, will apply to new and old cars which have carbon dioxide emissions of 120g/km or less, with a 3% supplement applying to most diesel vehicles.
Nigel Underdown, head of transport advice at the Energy Saving Trust, told more than 150 delegates at the event: “We saw some of the biggest changes in the fleet market when carbon dioxide taxation was introduced. Since then, I don’t feel the tax regime has driven much more change.
However, the 10% tax band will bring change, although not many fleets have tuned into it yet.”
The potential savings are significant and already major manufacturers are rushing to launch sub-120g/km cars to target fleets.
For example, a 40% tax-paying driver in a BMW 118d SE costing £20,685 and emitting 119g/km of CO2 would currently pay tax based on 18% of the car’s list price, or £124 a month, but from April this would fall to £89, a £420 annual saving.
In addition, the company’s Class 1A National Insurance Contributions charge on the benefit would fall from £476 to £344 – a £132 saving.
Across a 100-vehicle fleet, the low-tax choice savings for drivers and the company over a typical three-year period add up to around £165,000.
But the tax challenges facing fleets don’t end there, the conference heard, as the pre-budget report next month is expected to bring major changes to capital allowances.
Under new proposals, cars emitting more than 165g/km of CO2 could have the tax they can offset from purchasing and leasing over a typical three or four-year fleet cycle drastically reduced.
By contrast, the rules already state that cars in the sub-120g/km tax band benefit from 100% capital allowances, helping companies improve their tax position.
Gary Hull, director of employment solutions at PricewaterhouseCoopers, said: ‘The pre-budget report could bring some of the biggest changes we have ever seen in the taxation of company cars.’