· 2 min read · News

Six months on, the company car tax is beginning to bite

Published:

What impact has recent legislation on emissions had on the company car? Stefan Stern finds out how employers are coping with the changes and whether its affecting the choice of cars

Dug Brown, fleet manager, Somerfield


My job has become much more specialist. You really need to read up on the changes and go to meetings and presentations. And the company secretary and HR director need to be involved too.


The legislative changes go back three and half years. Back then we were saying that diesel cars were going to be more attractive they are between 25% and 40% more fuel-efficient. Even after the 3% tax penalty on diesels, it works out as a better deal.


Weve introduced more fuel-efficient cars for our high-mileage users [over 18,000 miles a year]. If our staff opt for a lower tax band car we pay a cash supplement. Staff are changing their attitude to diesel cars. You get a lot more per gallon compared to an equivalent petrol engine. Were also managing to get more senior staff into more environmentally-friendly cars.


But if staff opt to drive their own cars there are huge dangers for employers. If the car effectively becomes your place of work the employer has a duty of care. If staff were involved in a crash where there was a fatality and the car wasnt in good condition, you could face a corporate manslaughter charge.


In spite of this, the company car remains a powerful symbol. We dont tend to talk easily about cash in this country, so people compare cars as status symbols instead.


Phil Redman, fleet manager, IBM


We dont actually dictate the type of vehicle our employees should use we run what we call a user-chooser fleet. But people have been voting with their feet over the past 12 months. The number of staff opting for diesel engines has gone up from 5% to 30% in that time.


The other main trend is that there has been a considerable increase in the number of people taking the cash option instead of a car. People who do very high mileage often find it more effective to use their own car. But is this really a good thing? Company cars are bought new and are well-maintained. How well will people maintain their own cars, and will they often prefer second-hand?


I think we may see a decline in the use of company cars over time. Certainly people are downsizing their choice of car. It used to be the case that some people did extra miles just to get the tax benefits that is no longer the case. Congestion charges are coming to London and the fuel crisis last year made people think about other ways of working video-conferencing, e-conferences and so on. So perhaps people will start using their cars a little more wisely.


Jeremy Mills, operations manager, DaimlerChrysler Services Fleet Management


The change in the market has been been gradual rather than dramatic. People are still very keen to take the company car option, and low mileage users are coming back. A fair few have been looking to downgrade to pay less tax. But theres still a lot of ignorance about what the changes mean.


There is a potentially huge administrative burden involved in changing your company car scheme completely. Some companies may even be trying to cut short company car contracts they have already signed or to change some of the terms as a result of the new laws.


On the positive side, it looks as though it may be a record year for the UK market the estimated number of company cars in 2002 is 2.5 million. This has had a big effect on cars residual value of course. The graph is quite scary compared with the beginning of the year its fallen faster than the FTSE.