“Today, the company car is cheaper because of BIK tax rates. However, if that trend reverses it could cease to be the case and demand for cash allowances may increase.”
Consequently, employers need to start reassessing their future policies regarding company cars, salary sacrifice and cash allowances.
Some have already looked to encourage cash takers back into company cars. A Fleet News poll last year found that 69% of fleet respondents were seeing a move away from cash allowance towards company cars, prompted either by the company or the employee.
Those views have been echoed by leasing companies such as Lex Autolease, LeasePlan, ALD, Arval and Alpabet.
GE Capital UK has just published a new Cash or Car? guide and its fleet services commercial leader Gary Killeen says employees should review their cash or car decision every two years as taxation rules, employers’ company car schemes and personal circumstances can change.
He added: “The issues surrounding cash are not easily solved and should be the subject of serious management consideration in any organisation.”
Whether the tax changes are sufficient to encourage increased cash take-up remains to be seen but Killeen said: “The percentage of employees taking the cash option has steadied in recent years and there is evidence that this is gradually falling as more drivers and employers become familiar with the inevitable pitfalls.”
PremierBlue - 05/09/2012 12:14
Sorry, but I don't see a rush to cash as a result of the published BIK increases, especially as manufacturers have more than met these boundaries over the last few years. With EC targets for a new car 'average' CO2 of 95g/km by 2020, it's even arguable that the ramp isn't steep enough. In truth, Company Car Tax is lower than it's been for many years for the average driver, and the company car will remain a valuable car benefit for many years to come. Sure, there will be some who are better off taking cash or taking an ECO option (if in a blended scheme for example), but there is absolutely no chance that these alternatives will be better than the company car in the majority of cases. CCT issues are for fleet managers to deal with and they are more than capable of meeting this challenge in my experience.