September 7, 2001—A new survey reports that nearly half of UK companies responding said they will change the composition and structure of their fleets because of the new company car tax regime. In particular, they will take into account emissions and engine size. Nearly one in five expect to reduce the size of their fleets, often with employees being offered a cash alternative and/or being asked to provide their own vehicle for business use.
The survey, which was carried out in May/June 2001 by the Institute of Directors and chartered accountants and business advisers HLB Kidsons, looked at how the new company car tax changes beginning April 6, 2002, will affect the decisions companies make regarding the size and content of their car fleets and the benefits they offer their employees. The majority of respondents were small and medium-sized enterprises (SMEs) with 10 to 249 employees and represent a wide range of industry sectors.
Of the new measures, respondents feel that changes in car and fuel Benefits in Kind (BIK) are likely to have a greater impact than changes in Road Fund Licenses. The proposals to tighten up on the CO2 emissions of company cars were greeted with a mixed response.
Richard Baron, Deputy head of the Policy Unit at the Institute of Directors said, “The survey has highlighted that the Government’s policies seem to be working, especially amongst larger companies, with a swing away from company cars and changes in fleet compositions. The Government’s aim was to discourage the use of perk and unnecessarily large cars, but it should take note of the fact that 70% of company cars are considered to be necessary for business use, and not just perks.”
The survey suggests that companies will be forced to review the benefits that they offer to employees, with nearly 40% saying they will offer a cash alternative to cars, and nearly 30% saying they will revise the benefits package offered to employees. Rob Thompson, senior tax manager in HLB Kidsons’ Motor Group, concludes, “The implications are that many companies who want to leave their key employees in a break-even situation or better will have to compensate high mileage drivers either with extra pay or benefits. Alternatively, they will require extra funding to maintain their current car fleet.”
For more survey results, visit the Institute of Directors. For complete information on the car tax changes, visit HM Treasury.
