I LIKE spring. It’s a time to look forward. Put the dark days of winter behind us.
But the Chancellor’s Spring Statement gave us no forward visibility on Company Car Tax. No thoughts on bringing forward the company car tax incentives for electric vehicles.
It left us still in the dark. Back in the bad days of winter.
Forward visibility on company car tax is essential for small business and SME small fleets.
If this year your firm is considering a new three or four year lease on some new company cars, you have no idea what the benefit in kind (BIK) tax cost to your driver will be beyond the 2020/21 tax year. Or the NIC cost to your business for that matter.
Good business planning is essential for any SME. But that’s something denied by this current government. Which really has made a mess of the company car tax tables.
Just tell me the logic that lets a zero emission electric car move from a 9% tax banding position in 2017/18 to 16% in 2019/20, before plummeting back down to 2% in 2020/21. (And don’t forget those heady days when they were zero rated for company car tax.)
- Click here to see the current Company Car Tax Tables
- Click here to see the Company Car Tax Tables for 2020/21
Matthew Walters, Head of Consultancy and Customer Data Services at leasing company LeasePlan, was of a similar mindset.
He told me:
“Philip Hammond has again failed to announce the rates of Company Car Tax for 2021-22 and 2022-23. Many company car fleets and employees are now entering into 48-month leases that will stretch into those years, so they need clarity as soon as possible. The Chancellor must not fail to publish these rates in his Autumn Budget – if not before.”
Chris Chandler, Principal Consultant at Lex Autolease, the UK’s largest leasing company, was similarly forthright in his views:
“Future visibility on Company Car Tax bands is important for company car decision-makers, because they typically plan in three to four year cycles. It can then be more difficult to make vehicle policy decisions. This is particularly the case at the moment because the regulatory and technological environment is moving at such a pace.
“The vehicle tax system has to adapt to new technologies and environmental pressures, which means that when changes are announced, they can be pretty significant.
“If there are no post 2020/21 Company Car tax bandings announced until the next Autumn Budget, this only gives company car fleets around two years to factor these changes into their decision-making. In a rapidly changing taxation, environmental and technological landscape, it’s never been more important for fleets to have confidence in the future tax landscape.”
So where does this leave small businesses and SME small fleets?
Back in that dark place over business planning leases for company cars.
It might be that a more prudent step might be to take a shorter lease period – say just two years – until there is better clarity on BIK.
Or, as Nexus Vehicle Rental CEO David Brennan suggested to me, “this may create opportunities for the rental sector with medium and long-term rental now seen as an attractive stopgap.”
What about a cash alternative to the company car?
The other alternative, of course, is to let drivers lease their own cars by offering them a cash alternative.
It’s a trend that award winning leasing broker, Synergy, is noting. Paul Parkinson, Synergy’s Managing Director, told me over the phone yesterday:
“The CO2 piece is driving many from company cars and will continue to do so. People are looking for the next best thing, which is a fleet maintained personal contract hire car.”
Taking cash for car isn’t entirely straightforward though. You need to take advice from professionals in the industry because there are BIK tax implications.
Since April 2017, the taxman will take whichever is the greater under new OpRA rules: the cash for car value – or the taxable P11D value of the company car – whichever is greater. Unless the car chosen is sub-75g/km of CO2.
Easy for an SME? No chance.
This government is making it especially difficult for SMEs to choose their next company car. And the Chancellor’s Spring Statement did nothing to help.
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