With less than six months to go before major changes to company car tax come into force, fleets have been told to act now to ensure they are not unintentionally penalised by the new rules.

The tax changes will affect company cars put onto a fleet after April 1, 2009.

In order to ensure cars that would be adversely affected by the tax changes are on fleet by that date, companies need to order now as lead in times for some new cars can take as long as six months.

Based on CO2 emissions thresholds, the new capital allowances regime will have a major affect on the tax relief firms can claim each year for the depreciation of their vehicles.

There is also a major shift in how companies can offset the cost of leased cars against their tax bill.

“The fact that corporation tax relief is now based on a car’s emissions and not its list price means that people need to look again at what vehicles they allow on to their fleet and how they fund them,” said John Lewis, director general of the British Vehicle Rental and Leasing Association.

Only 10% of the cost of owned vehicles emitting more than 160g/km of CO2 will be able to be written off against tax, compared to 20% for vehicles with emissions under 160g/km.

For leased cars, those in the sub-160g/km band can offset the full rental price.

However those in the higher band can only claim relief on 85% of rental costs.

Alphabet director Mark Sinclair warned fleets that not only would they receive less tax relief for higher emitting vehicles but rental prices will have to rise to cover costs to leasing providers.

“Leasing companies will need to recover costs from the lessee to compensate them for the increase in funding required for higher emitting cars,” he said.

“The net effect will be an increase in rentals.”

Fleet consultant Alistair Kendrick called on leasing companies to disclose these price rises and predicted difficulty for managers attempting to change their fleet make-up in order to mitigate the effects of tax changes.

“Leasing companies must tell us how much they are going to be recovering to take account of the time lapse in gaining their capital allowance relief,” he said.

“For many fleet operators it will be difficult in the short term to get a significant move in the type of car that employees drive.

"This is particularly the case with a perk fleet of senior manager/main board users.” 

* Let Fleet News help you find the vehicles with sub 160g/km CO2 emissions. Visit our running costs database.