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The company car is here to stay

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Last week HR magazine reported on predictions that changes in the up-coming Budget could mean the end of the company car.

Don't hold your breath. I have serious doubts the opinions of tax expert Alistair Kendrick are based on any Treasury tip-off.

The Government introduced its emissions-based company car tax regime in April 2002 and it is acknowledged as a total success.

Since then, a reasonable, well-signposted tightening of the CO2 threshold has encouraged carmakers to produce lower emission vehicles and incentivised fleets to choose them, with many drivers paying less tax each time they change their car.

The current tax regime has been such a success that the average newly-registered company car now has lower emissions than its privately-owned equivalent.

The company car market was the only sector of the car market that grew in 2011, with fleets and businesses responsible for 58% of new registrations.

If anything, the company car tax system has been TOO successful, resulting in a larger than expected fall in tax revenues.

This may explain why, at the last Budget, the Government announced it would be abolishing its Qualifying Low Emission Car category in April 2012. This one-off measure will result in some larger-than-average company car tax increases for drivers of vehicles that emit between 100-120g/km of CO2, who will see their 10% benefit-in-kind (BIK) banding rise to between 11 and 15%. Employers will also face an increase in their National Insurance Contributions.

With the average company car leased on a three or four year contract, drivers and employers will soon have the opportunity to choose a new, lower emission vehicle - lowering their tax bill at the same time. There are already more than 200 different cars with emissions lower than the 99g/km threshold that means a 10% BIK band.

Rather than readjusting its successful tax regime, some commentators would have us believe the Government is changing course and wants to use the tax system to drive employees into older, more polluting, 'grey fleet' cars, losing millions of pounds of tax revenue in the process.

To suggest this at a time when millions of UK businesses are struggling to cope with economic uncertainty and the already huge burden of government taxation and red tape is opportunistic scaremongering at best.

No-one can predict what tax changes will be made in the Budget, but whatever does emerge, the leasing industry has always reacted when necessary to develop suitable products for its customers and their drivers.

It has a tremendous track record of keeping them mobile, in the most suitable cars at the lowest tax rates achievable.

John Lewis, is chief executive of the British Vehicle Rental and Leasing Association