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The outcome of the UK General Election has caused widespread uncertainty among the business community according to a recent study from the Institute of Directors and further contributed to ongoing concerns within the fleet and mobility industry.
Following the election, the Prime Minister now leads a minority government which has a horizon of weeks or months - rather than years. Hence the likelihood of planning and implementing policies with any real long-term vision is remote, even without the Brexit negotiations and recent shocking events in London and Manchester. This lack of policy vision will have a huge impact on businesses of all sizes, who are looking for some certainties beyond 2020.
We’re currently in a situation where business leaders and fleet decision makers are having to make medium to long-term decisions about vehicles and mobility without knowing the tax framework or its implications beyond April 2020. Everyone knows that businesses thrive on certainty, not guesswork.
The immediate focus after the General Election both for Government and industry has to be 'getting back to business'. From a fleet industry perspective, we need to look ahead to the Autumn Budget later this year – although a date is yet to be announced.
The publication of the Finance Bill earlier in the year caused sleepless nights among the UK’s fleet decision makers who are rightly concerned with the lack of clarity, practical implementation and unintended consequences of recent Government decisions. It is entirely likely the Government’s plans to impose new company car benefit-in-kind (BIK) tax bands – which were removed from the Finance Bill ahead of the snap General Election – will be restored after Autumn. These will mean tax bandings for sub-75g/km ultra-low emission vehicles (ULEVs) will rise steadily in the period to 2019/20 – even rates for zero emission cars will reach as high as 16 per cent BIK.
But in Boardrooms across the land there is a more strategic discussion about mobility taking place following the Finance Bill: the ‘cash versus car’ debate. The changes coming in are forcing companies to review and reduce the company car options they provide to employees. With the complexities and responsibilities that come with providing company cars, many companies are seriously questioning whether to go down the apparently simplified route of offering solely a cash option.
This, in my view would be a big mistake and extremely short-sighted in terms of the potential longer term consequences. It would be easy for fleet decision makers to think that company car programmes as ‘more hassle than they’re worth’. But this takes for granted the huge benefits such schemes provide to an organisation, not just to their employees.
It’s difficult to put monetary costs on the financial and legal value of a company car programme as the visibility, control and ability to deliver against duty of care that such schemes provide are invaluable. Aside from the benefits for staff recruitment and retention, the value of a company car programme to an organisation is only truly understood when it’s not there or unfortunately something goes wrong.
It’s worth remembering that even by switching to a cash-only scheme, a company still retains its duty of care obligations for employees using these vehicles for business travel. How will you know if your employee has insured, maintained and serviced that vehicle correctly? How will you know the environmental impact of these journeys? Unlike company car drivers, ‘cash’ buyers have little incentive to make the right choices in terms of economy or environmental impacts.
The company car is only a small part of the big corporate machine, but without this small cog working efficiently and safely the whole machine can quickly come to a halt. The fleet and mobility industry will watch with interest to see whether the new Government brings clarity and simplification to the taxation framework, enabling businesses to plan their longer-term mobility strategies. The other priority for the Government will surely be to support the fledgling movement towards ULEVs and their vital role in helping to address air quality concerns nationwide. While the costs of the new, cleaner technologies are coming down, it is by no means at parity with conventional internal combustion vehicles so ULEVs need real-world Governmental support.
It is important that with the current uncertainties and lack of clarity, UK businesses do not make knee-jerk mobility decisions which could have a significant cost in the long run. It is also crucial that Government recognises the vital role that fleet vehicles have played – and will play – in keeping the UK economy moving, while at the same time supporting the growth of low emission, sustainable transportation.