Company car choice list vehicle selection critical as benefit-in-kind tax changes bite
Significant changes to company car benefit-in-kind tax
over the next four years means company car choice list vehicle selection is
critical, according to Venson Automotive Solutions.
Any firms compiling company car choice lists should take
into account the length of vehicle replacement cycles and alert their drivers
of the changes and potential financial cost of picking certain vehicles, Venson
has warned fleet decision-makers.
Revisions to company car benefit-in-kind taxation
confirmed in last month’s spring Budget to encourage drivers into ultra-low emission
vehicles mean that employees selecting sub-100g/km vehicles, the tax burden
will be eased in 2020/21, as bills reduce with the introduction of a more
Simultaneously, the government is introducing a mileage
range element to the tax system for plug-in hybrid cars. Currently there are no
plug-in hybrid cars on sale in the UK with an electric mileage range of 40
miles or more meaning the three lowest CO2/electric mileage range tax brackets
in 2020/21 are currently irrelevant and stopping drivers from benefiting from
even greater tax savings.
For example, if a plug-in hybrid car was to be launched
with a range of 130 miles or more and CO2 emissions of 1-50g/km the
benefit-in-kind tax burden in 2020/21 would be 2% - a 7% point saving versus
2017/18 and a 14% point saving versus 2019/20.
In addition, the picture is further complicated with the
introduction later this year of the new Worldwide Harmonized Light Duty
Vehicles Test Procedure (WLTP). The new test procedure aims to provide a more
realistic picture of fuel consumption than the existing New European Driving
Cycle (NEDC), however fuel efficiency figures that better reflect real world
driving conditions will also result in CO2 emission increases.
In 2017/18 the driver of a pure electric car such as the
BMW i3, Nissan Leaf, a Tesla or a Volkswagen e-Golf will be taxed at 9% rising
to 13% in 2018/19 and 16% in 2019/20 before reducing to 2% in 2020/21. As a
result, there are concerns that tax rises over the next three years could
thwart electric car demand before demand accelerates in 2020/21.
Drivers of plug-in hybrid cars such as the Audi A3
Sportback e-tron and Mitsubishi Outlander PHEV will incur similar tax increases
over the next three years before tax levels are linked to electric mileage
range as well as CO2 emissions (1-50g/km). The Audi e-tron has a published
electric mileage range of “up to 29 miles” putting it into the highest
CO2/electric mileage range tax bracket in 2020/21 of 14%. However, drivers will
save tax due to a 2% cut versus 2019/20 levels.
Simon Staton, client management director of Venson
Automotive Solutions, said: “While the government is encouraging fleets and
company car drivers to select zero and low emission cars to improve air
quality, it is those drivers who will potentially suffer the biggest tax
increases at least over the next three years. Effectively inconsistent
government tax policy is penalising not rewarding company car drivers switching
to such cars, particularly electric models before 2020/21.
“When making company car choices, it is not just about
company car tax rates in 2017/18, but what they will be in 2020/21. With many
fleets now operating four-year replacement cycles, fleet managers must inform
and educate drivers to reduce the risk of employees being hit by tax changes in