Why Are Company Owned Cars On The Increase?
Friday, 12. August 2016
For the first time in a decade the number of employees paying Benefit In Kind (BIK) tax has increased according to statistics released by HMRC for the years 2014/15. It may only be a 1% increase from 940,000 to 950,000 but it has all of the so called experts weighing in with opinions as to why this has happened.
Whilst Brexit is being flung around by a few they should reflect on the fact that these figures relate to 2014/15 when the referendum was but a glint in PM Cameron’s eye. In amongst the more believable reasons is that for the first time engine development has managed to pretty much keep pace with the increasing demands by the chancellor on BIK tax.
So whilst he has dropped the CO2 threshold year on year engines have become more efficient chucking out fewer CO2’s and therefore neutralising the effect on tax. Another view is that companies that had maybe reverted to car allowances, to allow employees to avoid benefit in car tax, or allowed employees to obtain their own cars, which they would drive for business and charge back company miles on the tax and NI free mileage rate, had moved back to company cars.
The reason for this move away from employee owned cars (known as the Grey Fleet) to company cars is not suggested to be financial but Health & Safety. Companies are responsible for the safety of cars driven by employees on company business, even when the cars are owned by the driver. So if an employee has an accident whilst driving on company business in his own car and the accident can be attributed to the car not being regularly serviced, the company is held responsible for the consequences.
Crazy but true. We are still nowhere near the peak of company owned cars of 1.16 million recorded in 2006/7 but the treasury must be pleased with this turn of events. They collected £1.9 billion from company car tax and NIC in 2014/15 so a nice little earner from them. Last time the number of company cars matched the current figure was 2011/12 when the tax and NI collected amounted to £1.66 billion.
This is as a result of tougher CO2 banding and of course the increase in cost of cars. Personally I continue to see a steady growth in the number of SME’s financing cars personally rather than through their business. Especially since the rates, provided by most leasing companies, are pretty much the same for business and personal applicants. By Graham Hill
