Could Government Greed Be Killing Off The Company Car?
Wednesday, 12. June 2019
Over the last few years, we have seen more company car drivers opt for car allowances rather than replace their current company car with another. For many companies, this is a nightmare. Because whilst an employee is using his own car for business it becomes part of what is known as a grey fleet.
This means that at the time the employee is driving on company business it is the responsibility of the company to ensure that the car is safe and legal along with the driver (health and safety at work). This makes life difficult for businesses who have to ensure that cars are serviced properly and on time. That they are legal with legal tyres and current MOT if applicable. The car must be properly insured for business use and for the carrying of company tools, stock or equipment.
Companies also have a problem with car selection as employees are more likely to use their car allowance for a used executive or maybe a sports car than a car selected by the company that often equates to the status of the employee or the use for which the car is to be used. Some employees would be happy to drive an old car allowing them to take some of their allowance and use it to pay for holidays. This may not portray the correct company image.
The company, therefore, has to decide whether the payment of a car allowance should come with conditions such as type, make, age, safety levels etc of the car selected by the employee. It can become an administration nightmare.
Company responsibilities apply even if an employee drops off post each evening and receives a mileage allowance. From the Government’s point of view, whilst they collect income tax against car allowance payments they are currently losing fortunes as drivers opt for used cars. The vast majority of company cars are new cars which means that the Government can collect VAT, first registration tax, from employees Benefit In Kind Tax and from employers NI.
This ridiculous situation has come about because of the greed of the Government when setting BIK tax levels. In 2018/19 if you drove an electric or hydrogen-powered car emitting no CO2 whatsoever you would still have a BIK bill of 13% of the list price of the car. In the current year 2019/2020 that actually increases to 16% with most petrol cars falling within a band of 19% – 21%. In 2020/2021 we finally see zero-emission cars drop to 2% but petrol cars will increase to 21% – 25%.
Worst of all is the fact that the Government hasn’t released rates for 2021/2022 so if you were to take a company car now on a 3-year lease you wouldn’t have a clue as to what you would be paying in that tax year.
The whole thing is a disaster for both the Treasury and for companies that run company cars. It’s about time the Government got its focus back on the day to day running of the country than Brexit and electing a leader. By Graham Hill
