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BiK Rates Company Car Tax

HMRC data shows ‘unsupportive’ tax regime forcing opt-out drivers

By / 5 months ago / Latest News / No Comments

New Benefit-in-Kind statistics published by HMRC reinforce the need for the Government to support the company car market by taking action to address the vehicle tax system.

Parking-related costs made up nearly a third of the overall cost of motoring.

The BVRLA believes the fall in the number of employees will continue until the Government introduces a more supportive BiK regime

So says the BVRLA as figures within the report indicate that during the past two years there has been a reduction of 70,000 company car drivers.

According to Table 4.5, provisional data for 2017/18 shows the number of people paying BiK on company cars fell 50,000 compared to 2016/17; down 5.3% from 940,000 to 890,000 in a single year.

The rate of market decline also appears to be increasing, with the previous year reporting a 20,000 or 2.1% annual reduction while, compared to 2009/10, the market is down 80,000; a drop of 8.2% in eight years.

HMRC has said the decline in the reported number of recipients of company cars since April 2016 coincides with the introduction of voluntary payrolling and added that at least part of the apparent reduction may be due to employers moving from submitting P11D returns to collecting tax on company cars through payroll, which means that increasing number of employers are opting not to return P11Ds at the end of the tax year. It’s added that providing this data was not made mandatory until 2018-19.

However, the BVRLA says that, despite this uncertainty, it believes that this downward trajectory will continue until the Government makes changes to the vehicle tax system, with persistent tax rises, uncertainty in future rates and confusion around the tax implications of WLTP all having hindered the uptake of company cars, as backed up by reports from BVRLA members.

BVRLA chief executive Gerry Keaney said: “We hear the Government committing to its zero emission road transport ambitions, but we fail to see them aligning their fiscal policy to help support it. Our members make rational, cost-based decisions and are buying plug-in vehicles at scale which go on to feed the used car market. By getting the company car tax system right, the government can achieve some quick wins.

“With the average newly registered company car emitting 19% less CO2 than the average grey fleet car, the Government can speed up delivery of its air quality ambitions by having a tax system that incentivises drivers to take a company car.

“We have continued to engage regularly with HM Treasury and have met with officials at 10 Downing Street to ensure that policymakers understand the risks of failing to align environmental and fiscal policies. The contents of the government’s Draft Finance Bill, due to be published on 11 July, will tell us whether they have actually been listening.”

Members of the Michelin Fleet Panel – which includes representatives from some of the UK’s biggest leasing, fleet management and rental companies – have also called for clarity from the Government on company car tax changes as they warn that the delay risks driving motorists out of company car schemes altogether.

The issue is also prompting record numbers of contract extensions among Michelin Fleet Panel members, with estimates that tax uncertainty is delaying as many as 250,000 new company car orders.

Members warned that drivers extending contracts would almost certainly have replaced their cars with more environmentally efficient vehicles by now had there been clarity on taxation beyond April 2020; undermining the Government’s own eco targets as warned by the BVRLA last month.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.