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Budget threatens the future of company car schemes, predicts MHA MacIntyre Hudson

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The Budget on 21 March could include an “aggressive” clampdown on company car taxation, threatening the fleet industry, according to accountancy firm MHA MacIntyre Hudson.

Alastair Kendrick, employment tax director at the firm, said : "My expectation is that this Budget will see the Government announcing an aggressive plan for company car taxation, which will be implemented from 2014.

"This creates uncertainty over the future of company cars and the leasing industry as a whole. In 2002, there were over 1.3 million company cars on our roads but this has rapidly decreased to reach a low of around 900,000. Following changes to be announced in the Budget, this number will drop to 500,000 by the end of 2015.

"It simply won't be economical to offer cars to employees. There is an incentive to encourage manufacturers to devise 'greener' cars, which produce lower CO2 emissions but we will see the benefit in kind on a 120g/km car increase from the current level of 10% (13% for diesel) to 16% in 2013 (19% for diesel).

"Many businesses have already stopped company cars as a benefit and I predict this trend to continue. Unfortunately, numerous employees will only be aware of these changes when they receive their April pay packet and it will just be another blow during hard pressed times.

"The group likely to be most affected is those who have taken low emission cars via a salary sacrifice car scheme and are, in addition to the taxable benefit, taking a salary reduction to cover the employer's cost of leasing the car."