Government tax policy could be encouraging drivers to take a cash allowance and use their own vehicles instead of opting for a company car, according to the British Vehicle Rental and Leasing Association (BVRLA).

Grey fleet vehicles are likely to be older and less efficient than a company car.

The concerns are based on provisional HMRC data, which showed 950,000 employees paid company car tax in 2014/15 – that’s a 1% increase on the 940,000 in the previous year, and the first growth since 2006/7.

However, the BVRLA pointed out that this coincided with a period where the workforce grew by 500,000 people, adding that tax liability per employee had also increased. The number of people paying company car tax matched 2011/12, but they paid a combined £150m more – a 12% increase, or an average of £158 per person.

That’s before the two percentage point increase announced in the 2015 budget, and the retention of the 3% Benefit in Kind surcharge for diesels, which is paid by 82% of drivers. The BVRLA is worried that this could lead to employees using their own cars and taking a cash allowance instead, and that these are less efficient and less likely to be equipped with the latest safety technology.

BVRLA Chief Executive, Gerry Keaney, said: “Company cars are amongst the newest, cleanest and safest vehicles on UK roads, but we believe uptake is being hindered by an ever-increasing tax burden.”