Andrew Leech, business manager at Mycompanyfleet, the automotive and fleet division of HR solutions provider, NorthgateArinso said that businesses would now have to review their funding methods to keep acquisition costs in check, as well as tighten management on fuel expenditure, as the VAT increase to 20%, combined with a rise in fuel duty, was likely to push pump prices to still-higher levels.

Mr Leech, however, welcomed changes in the small business rate of Corporation Tax which has been cut to 20% as a boost for businesses, particularly in the automotive industry.

'The automotive industry has a tradition of creating innovative small businesses supplying the market's needs and this may be a much needed shot in the arm for employment prospects in the sector,' he said.

For fleet operators, the newly announced tax increases will increase the need for tighter control across the board to help maintain profitability, said Mr Leech.

'The rise in VAT will clearly trigger increases in vehicle list price, fuel prices and servicing, maintenance and repair costs, and businesses will have to look closely at which is the optimum funding method for them.

'Contract hire could now become more attractive as a funding method because of the element of VAT recoverability in monthly lease rentals, while outright purchase fleets will simply have to swallow the increase.

'The effect of all the tax changes in combination will to some degree impact on whether organisations buy or lease their company cars and vans, provide staff with a cash allowance or opt to introduce a salary sacrifice scheme.

'Consequently, over the coming months many organisations will be consulting with their fleet management suppliers and conducting wide-ranging reviews of their current fleet funding routes to ensure they do not lose out financially from the changes.

'In addition, the reforms to the BIK company car tax system confirmed by the Chancellor in the Emergency Budget will increase carbon emission benchmarking by 1% per annum. This is a very clear signal to fleets to select low emission, more environment friendly vehicles if they wish to control their BIK and Corporation Tax liabilities,' he said.

'Making the right choice now will allow fleet managers to make substantial savings, but the wrong ones could cost their companies thousands, and even tens of thousands, in extra costs.

'Fleet management software solutions, like our own FleetAcumen, can help provide fleet managers with the answers they seek, as they provide the means for tighter, more efficient and less costly fleet management.

'Fleet managers will need to take some tough decisions now to ensure they are not storing up an extra cost burden for their companies over the next three years,' added Mr Leech.