ECO schemes could curb fleet tax rises
Fleets could help circumvent fast-rising company car taxation by deploying a blended fleet and employee car ownership (ECO) solution that brings a ‘best of both worlds’ approach.
That’s according to the tax experts at fleet consultancy firms BCF Wessex and HRUX (Human Resources User eXperience), who say there has never been a more urgent time for fleets to review their company car policy and ask whether there are better solutions.
Highlighting how a ‘perfect storm’ of circumstances – including rising BiK costs and diesel taxes as well as WLTP changes and the reduction in the main rate threshold for capital allowances – mean that the traditional company car no longer always offers the best value, both firms are working together to show clients how ECO schemes are coming back into play and, depending on the fleet make-up, can work very well.
Although the Government’s introduction last year of new OpRA rules led to concerns that ECO schemes were no longer viable, BCF Wessex director David Rawlings told Fleet World that such schemes can still work when based on AMAP rates and can actually work very well for some drivers, bringing “substantial” savings for both drivers and fleets in the right situations. According to Rawlings, fleets can save tens of thousands of pounds per car in the right circumstances, typically for higher-mileage, business-need drivers.
His comments are backed up by Harvey Perkins of HRUX, who, like Rawlings, is an ex ‘Big 4’ accountancy partner and said it’s surprising how few business miles drivers have to do to make ECO schemes worthwhile.
He commented: “It depends on CO2 emissions. It depends on tax rates. But, you can have someone who only does five or six or seven thousand business miles a year who receive sufficient AMAPs that it basically covers the cost of funding the vehicle. And the implication is that therefore that you can build a solution around the individual signing the contract for the car and the employees paying the AMAP payments via PAYE. And that works.”
Turning to ECOs can also ensure fleets retain control of vehicles, compared to the growing number of drivers who are switching to take cash options and bringing ‘grey fleet’ risk management issues for businesses.
Although switching to an ECO scheme won’t work for all fleets or drivers, one way that both HRUX and BCF Wessex are offering clients a best-of-both-worlds approach is by helping to develop a blended solution that includes both conventionally fuelled vehicles on an ECO basis for higher-mileage drivers as well as a company car policy that covers sub-50g/km electric and plug-in hybrid vehicles on contract hire to bring savings for lower-mileage drivers.
The scheme is flexible and means that as the technology for ULEVs – and therefore the business case for them – improves, ECO drivers can switch to lower-emission vehicles on contract hire. However, if the Government decides to hike the tax rates on ULEVs in the future, drivers can switch to the ECO solution to benefit from the savings here.
David Rawlings said: “It’s all very well saying a scheme works today but we want solutions for our clients that we know they’re not going to chop in and out of. Change is expensive. We will make the right changes at the right times with them.”
However, both firms are emphatic that businesses should explore their options to see if ECO – or other solutions – could present a better scheme, at a time when they’re seeing unprecedented interest in businesses looking to opt out of company cars. Since the OpRA announcement last year, the firms say there’s been a knee-jerk reaction of businesses saying they want to get rid of cars – more so than in the last eight or nine years.
Perkins added: “The key message is, ECO won’t work for everybody but where it does work, it works brilliantly. And we have set up a business to help people understand what’s right for them. So if the answer is ECO, then we’ll advise on that. If the answer isn’t ECO, we will tell them that, that’s the key. But a lot of fleets are going to find the answer is ECO.”