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One in four set to dump company car
One in four company car drivers may exchange their vehicle for a salary increase to escape the new car tax on emissions starting on 6 April, according to a survey by Godfrey Davis Contract Hire.
The car hire company found that nearly half of all the 3 million UK company car drivers are allowed a cash option and that 24 per cent (about 750,000) would take this up. Among high-mileage business car drivers, such as sales reps, a staggering 34 per cent indicated they would opt for cash rather than a company car.
The new tax year will see the old system of business mileage and car age for assessing benefits in kind disappear to be replaced by a system based on emissions – which will give many company car drivers a nasty shock in their April salaries.
There is concern that those that opt for cash will then go and buy a car just as big as the one they gave up – which would not help pollution. The mass defection from company car to private ownership would also leave the Treasury with a £600m deficit in tax revenues (about a quarter of the £2.4bn raised each year from the existing system). This could result in those that are left with company cars having to pay even more tax to make up the shortfall.
Author of Tolley’s Company Car book, Alison Chapman, said that a lot of company car drivers have still not understood what is going to happen: “This will come as a shock. When people open their April pay cheque and notice money is missing, that will tend to focus the mind.”
One of the oddities of the new system is that it will penalise those that drive substantial miles on business, as there will no longer be a discount, but it will benefit those who have a company car as a perk and who drive less than 2,500 business miles per year.
Information supplied by TravelMole’s sister site, accountingweb.co.uk
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