Fleets must future-proof company car choice lists as industry anger mounts over government diesel company car 2018 tax rises

Businesses must future-proof company car choice lists as industry anger mounts at the government’s decision to increase benefit-in-kind tax bills for around 800,000 employees who drive diesel vehicles from April 6, 2018.

There have even been suggestions that Chancellor of the Exchequer Philip Hammond, who announced the measure in the autumn Budget Statement, is trying to “kill the company car”.

However, any such move would be extremely short-sighted as, with the political focus on improving air quality company car drivers are typically at the wheel of the safest low-emission vehicles available.

What’s more any move away from company cars and a rise in demand for cash allowances signalling an increase in the size of the UK’s ‘grey fleet’ – employees who drive their own cars on business trips – would significantly increase corporate administration, notably in respect of work-related road safety and employers’ duty of care compliance requirements.

A further option to save tax would be for either employers to ‘downgrade’ the level of company car entitlement to staff or for employees’ to voluntarily choose a cheaper vehicle than the grade to which they were entitled.

Meanwhile, the Society of Motor Manufacturers and Traders (SMMT) says that the government’s “on-going anti-diesel messages” are undermining business, as well as consumer, confidence, manifesting itself in new car registrations falling in November for the eighth consecutive month.

SMMT chief executive Mike Hawes said: “Diesel remains the right choice for many drivers, not least because of its fuel economy and lower CO2 emissions. The decision to tax the latest low emission diesels is a step backwards and will only discourage drivers from trading in their older, more polluting cars. Given fleet renewal is the fastest way to improve air quality, penalising the latest, cleanest diesels is counterproductive and will have detrimental environmental and economic consequences.”

The forthcoming tax rise further underlines the requirement for fleet decision-makers to future proof their vehicle operating decisions as the default fuel choice may no longer be diesel with petrol, hybrid and plug-in vehicles all potential viable alternatives.

The Chancellor announced that the existing company car benefit-in-kind tax supplement would increase from 3% to 4% from April 6, 2018. He said the take hike would help to pay for air quality improvements with transport emissions one of the biggest contributors to pollution.

The rise from 3% to 4% applies to all diesel cars (not hybrid diesels) registered on or after January 1, 1998 that are not certified to the new Real Driving Emissions 2 (RDE2) standard.

The government admits that “few, if any cars, cars will meet RDE2 standards in 2018 to 2019” as the standard is not due to be fully mandatory until 2020. However, any diesel cars that are certified to the RDE2 standard will not be subject to the supplement.

The government says that 350,000 company car drivers per year replace their vehicles, so within a few years, most affected drivers would have had the opportunity to choose new models not subject to the supplement.

The rise in the diesel car tax supplement is in addition to company car tax increases previously announced for consecutive year up to the end of 2020/21. Those rises means, for example, that tax on a 99g/km diesel car will increase from 21% (including 3% supplement) in 2017/18 to 28% in 2020/21 (including 4% supplement) – a rise of 33%.

Government calculations suggest that drivers of a BMW 3 Series (CO2 emissions 111-130g/km) will see tax bills rise in 2018/19 by £60 (basic rate taxpayer) and £120 (higher rate taxpayer), a BMW 6 Series (CO2 emissions 131-150g/km) by £125/250 and a Ford Focus (CO2 emissions 91-100g/km) by £43/£86.

For any employees driving cars that meet the RDE2 standard and are therefore exempt from the new 4% supplement, HM Revenue and Customs says it will issue guidance on how they should be treated so that the diesel supplement is disapplied. The government currently estimates that will affect the “low hundreds” of employees.

For 2019 to 2020 onwards, employers will have to note reported NOx emissions for new diesel cars and check whether or not they meet the RDE2 standard. The government says that information will be available on the same documentation – the certificate of conformity – which lists a car’s CO2 emissions figure.

John Pryor, chairman’s of fleet decision-makers’ organisation ACFO, called the tax hike “grossly unfair”.

He continued: “Fleets and drivers choose to operate diesel company cars because they are efficient, particularly for when clocking up high annual mileages. To penalise such a business-led decision is grossly unfair.

“With already announced company car benefit-in-kind tax rates rising year-on-year, the one percentage point diesel supplement increase further slices away at the value of company cars to both employers and employees. Employees particularly may think that it is not worth having a company car and may opt for a cash allowance.”

By allowing employees to take a cash allowance and “do their own thing”, Mr Pryor warned  that they may choose an older, more polluting vehicle than the company car they may otherwise have been entitled to, which then damaged the government’s bid to improve air quality.

Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association, accused the government of “going back on its word” by retrospectively raising the company car tax bill of hundreds of thousands of workers.

He said: “People that chose a diesel car as a cost-efficient, low CO2 form of essential business travel are being punished unfairly. Why should drivers at work be treated differently from other taxpayers?”

Paul Hollick, chairman of fleet industry training organisation ICFM, accused the Chancellor of being “on a mission to drive employees out of company cars”.

With company car benefit-in-kind tax bills due to rise year-on-year to the end of 2020/21, Mr Hollick said: “The actions that the government is taking shows that it does not understand that the emissions problem – and therefore the whole air quality problem – is with older vehicles. Cars that meet Euro6 emission standards, which is an increasing number of company cars, are the ‘cleanest’ available.”

  • Chancellor of the Exchequer Philip Hammond also announced in the Budget that a Vehicle Excise Duty (VED) supplement would apply to apply to new diesel cars first registered from April 1, 2018, so that their First Year Rate is calculated as if they were in the VED band above. For example, a Ford Focus diesel (CO2 emissions 91-100g/km) will be subject to an additional £20 in the First Year, a Volkswagen Golf (CO2 emissions 111-130g/km) an additional £40, a Vauxhall Mokka (CO2 emissions 131-150g/km) £300 and a Land Rover Discovery (CO2 emissions 171-190g/km) £400, according to government figures. The measure will not apply to next-generation clean diesels – those meeting the RDE2 standard.

London Mayor consults on 2020 Ultra-Low Emission Zone expansion

London Mayor Sadiq Khan has launched a public consultation on the next phase of his hard-hitting plans to tackle the capital’s toxic air, reduce filthy emissions and protect the public from harmful pollution by expanding the Ultra-Low Emission Zone (ULEZ).

It is proposed that the ULEZ standard will be applied London-wide for lorries, buses and coaches from October 26, 2020 and for cars, vans and motorbikes – with limited exemptions – up to the North and South circular roads from October 25, 2021.

The Mayor said he was determined to help thousands more Londoners breathe cleaner air and was delivering a series of measures to protect public health and dramatically reduce car emissions from older more polluting vehicles.

The Mayor recently delivered the first phase of his air quality improvement plan by introducing the new weekday (7am-6pm Monday-Friday) £10 Toxicity Charge (T-Charge) in central London for the oldest vehicles. That runs alongside and on top of the £11.50 Congestion Charge (C-Charge).

From April 8, 2019, the Mayor has already announced introduction of the second phase of his plan with implementation of the ULEZ. It will replace the T-Charge and cover the same central area, alongside and on top of the C-Charge, but it will operate 24 hours a day, seven days a week, 365 days a year.

The daily charge for non-compliant vehicles will increase from £10 to £12.50 (for cars, vans and motorbikes) and £100 (for buses, coaches and lorries).

The Mayor says the extension of the ULEZ in 2021 could affect 100,000 cars a day, 35,000 vans a day and 3,000 lorries a day.

Drivers of non-compliant cars, vans and motorbikes would pay the same £12.50 daily fee as the central London ULEZ. Drivers of non-compliant lorries, coaches and buses would pay £100 a day.

Diesel vehicles that do not meet Euro6 emission standards and most petrol vehicles that do not meet the Euro4 standard would have to take action or pay, making the ULEZ the tightest emission standard adopted in any major world city, it is claimed.

The area covered by the expanded ULEZ would include all roads up to a limit of the North and South circular roads, but not the North and South circular roads themselves.

The fine for non-payment of the charge if a vehicle does not meet the ULEZ standard is £130 reduced to £65 if paid within 14 days for cars, vans and motorbikes – although the new consultation includes a suggestion that the fine could rise to £160 – and £1,000 reduced to £500 if paid within 14 days for lorries, buses and coaches.

Mr Khan said: “I am determined to take the bold action needed to protect the public from London’s poisonous, deadly air. I can’t ignore the shameful fact that London’s air is so toxic it harms children’s lungs, exacerbates chronic illness and contributes to thousands of premature deaths each year.

“Following the successful introduction of the T-Charge, and confirmation of the central London ULEZ, I am moving ahead with the next stage of my plan to expand the Ultra-Low Emission Zone up to the busy North and South Circular Roads.

The consultation, which closes on February 28, 2018, is accessible at: https://consultations.tfl.gov.uk/environment/air-quality-consultation-phase-3b/?cid=airquality-consultation

Company car tax and VED rates to switch to WLTP CO2 figures from 2020

Company car benefit-in-kind tax and Vehicle Excise Duty (VED) will be based on carbon dioxide (CO2) emission figures derived from the recently introduced Worldwide harmonised Light vehicles Test Procedure (WLTP) test procedure from April 2020.

Amid fears that could spell higher tax and VED rates, fleet industry leaders have called on HM Treasury to adopt a revenue neutral approach.

Company car benefit-in-kind tax and VED is currently based on CO2 emissions figures calculated using the New European Driving Cycle (NEDC) vehicle testing procedure.

However, from September 1, 2017 the NEDC regime has been replaced by the WLTP test procedure.

Long-time calls by the fleet industry to clarify when company car benefit-in-kind tax and Vehicle Excise Duty systems would switch to using data derived from the WLTP regime were clarified by Chancellor of the Exchequer Philip Hammond in the autumn Budget Statement. He said that NEDC figures would continue to be used until April 2020, when the new WLTP figures will be introduced.

The government said that following discussions with the car industry it considered that the timeline for introducing the new system would give manufacturers time to reflect the new values in all of their vehicles, and to explain to customers what the change would mean.

Industry experts have suggested that CO2 figures on a car-by-car basis could increase by about 20% with introduction of WLTP.

As a result, industry groups have called for a recalibration of both company car benefit-in-kind tax and VED emission bands to ensure revenue neutrality and avoid any tax increases, which could be a further nail in the coffin of company car demand with employees opting to take cash.

However, whether CO2 emission thresholds will be recalibrated to take account of any increase remains to be seen. Neither Mr Hammond nor the Budget papers gave any indication as to whether tax bands and CO2 levels would be realigned.

If tax thresholds remain unchanged – tax rates have already been announced to the end of the 2020/21 financial year – then the likelihood is that company car benefit-in-kind tax bills will rise significantly.

Figures published by automotive industry data provider JATO for a handful of models indicate the CO2 g/km difference between NEDC and WLTP derived figures.

For example the CO2 g/km figure on a BMW X5 3.0D Xdrive automatic jumps from 156g/km to 183g/km. If already published tax tables were used to calculate the percentage of P11D due in 2020/21 a driver’s tax bill would jump just one tax band from 36% to 37% assuming no company car tax diesel supplement was due.

However, for a Peugeot 308 1.2 PureTech 130 Active SW with emissions up from 106g/m to 121g/km the model would move from the 25% tax bracket in 2020/21 to the 29% tax band. Meanwhile, a Volvo XC60 2.0 D4R Design Geartronic 4WD with emissions up from 133g/m to 148g/km would switch from the 31% tax bracket in 2020/21 to the 34% threshold.

Paul Hollick, chairman of fleet industry training organisation ICFM, said: “If the introduction of a company car benefit-in-kind tax system linked to new WLTP emissions data does not result in a wholesale restructure of band thresholds tax bills will increase significantly. The result will be that employers and employees abandon company cars as a benefit that is too expensive. Instead employers and employees will turn to cash and PCH alternatives.”

Gerry Keaney, chairman of the British Vehicle Rental and Leasing Association, welcomed final confirmation that a new WLTP-based CO2 company car tax regime would be introduced in 2020.

However, he added: “Although we had pushed for the vehicle leasing industry to be given an extra year to prepare for these changes, we look forward to working with the government in developing a tax revenue neutral approach.”

Fleet managers say a third of company cars will be plug-in by 2022 but ‘fully autonomous’ vehicles provide challenges

Fleet managers estimate that one-in-three cars they manage will be either a plug-in hybrid or electric by 2022 and within a decade that figure will have increased to one-in-two.

Fleet managers who don’t currently have a plug-in hybrid or electric vehicle within their operations, believe that they will do so within an average of four years, according to Kia’s new ‘2017 Fleet Market Attitudes’ report.

The delayed adoption by fleet managers was because:

  • 41% said the design of existing cars “looked unprofessional”
  • 35% cited that the UK’s charging infrastructure was a barrier
  • 27% said plug-in hybrids and electric cars were too expensive
  • 20% felt that they did not yet understand enough about the technology, showing that more information across the industry was needed, said Kia, which interviewed 150 fleet managers.

The study was published shortly after the British Vehicle Rental and Leasing Association in its ‘2018 Industry Outlook Report’ suggested that 2019 and not 2018 would be the ‘breakthrough’ year for pure electric vehicles with next year being the year of the hybrid when it came to growth in electric car registrations.

Additionally, when looking at the UK’s charging infrastructure, 55% of all fleet managers in the Kia study agreed that the UK’s charging infrastructure was not good enough to currently warrant fully investing into the technology. Conversely, of those that were yet to adopt, they believed that the UK’s charging infrastructure would be better by 2021 – with battery life and charge time improving by the same date.

Of the fleet managers who did have plug-in hybrid or electric vehicles within their operations, the top reason was because they were good for the environment (67%), followed by an understanding that they were cheaper in the long run (67%) – at odds with fleet managers who didn’t operate the cars and believed they were too expensive – and that the charging infrastructure was good in their area (58%). That was followed by 43% who believed they were more attractive than ‘regular cars’ and 41% who stated that there was demand from employees to drive them.

Looking to 2018 and fleet managers said they were looking to further cut company car emissions due to the main rate threshold (18%) for capital allowances for business cars reducing to 110g/km of carbon dioxide (CO2) from 130g/km. A total of 77% of respondents said that their organisation intended to change their fleet policy next year to take account of the change. Additionally, the 100% First Year Allowance threshold reduces to 50g/km (presently 75g/km) from April 2018, while on vehicles with CO2 emissions above 110g/km: companies can write down 8% of the cost of the car against their taxable profits each year, on a reducing balance basis.

The survey revealed that currently, the average CO2 levels of organisations’ fleets was 118g/km, with 27% being less than 110g/km.

However, a similar proportion stated the average to be more than 130g/km, while 30% admitted they didn’t know – suggesting, said Kia, that emission tax bands remained a concern, but were not necessarily a ‘deal-breaker’ for those who wished to purchase cars above the threshold.

The ‘2017 Fleet Market Attitudes’ report also revealed that two thirds of respondents admitted that their organisation was nervous about operating a petrol or diesel car that wasn’t a plug-in hybrid for their fleet in the wake of the government’s earlier this year announcement that solely petrol and diesel cars may be banned from 2040.

John Hargreaves, head of fleet and remarketing at Kia, said: “As more and more organisations embrace new technologies for the vehicles in their fleets, traditional powertrains are becoming less likely to be considered the default option.”

The fleet industry is also developing of in-vehicle technology with ‘assisted driving’ and ‘semi-autonomous’ features gradually becoming more commonplace.

However, when it comes to ‘fully-autonomous’ vehicles, most fleet managers (93%) see challenges. Identifying who was liable in the case of an insurance claim (56%) and the cost in updating roads and motorways so that they were compatible (47%) were cited as major concerns.

In addition, 76% of respondents thought that the greatest challenge facing ‘fully-autonomous’ driving was in changes to culture – with employees expected to work longer hours while commuting.

However, despite those barriers, many respondents believed that ‘fully-autonomous’ vehicles offered significant benefits. The majority (74%) agreed such vehicles would result in fewer road crashes – potentially saving fleet costs and increasing road user safety, while 64% believed that their fleet would be cheaper to maintain if it were ‘fully-autonomous’.

FSGB to continue technology focus in 2018 as it helps customers meet compliance objectives

Leading-edge technology and delivery platforms are at the core of fast-growing Fleet Service Great Britain (FSGB), which in late 2017 moved into larger offices and in the New Year will continue its focus on the integration of all services to deliver to customers a genuine end-to-end management solution, notably in the occupational road risk management sector.

Every element of FSGB’s range of vehicle, driver and journey management solutions is handled through integrated technology as a result of the company’s investment in systems and people to achieve its objectives.

FSGB’s business success during its almost 36-months of existence is built on the company embracing a unique co-ownership model and its senior management team having more than 100 years’ experience in all aspects of fleet operations with a clear focus on delivering internally-developed, innovative solutions to customers.

Based on listening and working with customers to deliver a combination of both app-based and online solutions, FSGB’s DNA is client partnerships to maximise operational cost reductions.

Marcus Bray, FSGB’s head of sales and co-founder, said: “The technology takes vehicle, driver and journey management solutions to new levels with in-depth analysis and access to a wealth of data and information.

“That development continues apace in 2018 and will reflect new challenges, notably the May 25, 2018 introduction of the General Data Protection Regulation (GDPR), which will have a potentially significant impact across organisations, and particularly for fleet introduction of connected cars.

“Some of the information already collected by employers relates to employees and their behaviour so FSGB will help businesses to be clear about what information is being gathered and why and how it is being used.

“FSGB is helping customers with that transparency, while ensuring customers’ operations, systems and processes continue to align with compliance and audit requirements of industry standards such as Van Excellence, the Fleet Operator Recognition Scheme and the CLOCS (Construction Logistics and Community Safety) Standard.”

Meet the team – Simon Bray

Name: Simon Bray

Job Title: Fleet controller

Explain your role in 10 words: Somebody that helps people with their problems or requests

How long have you worked at Fleet Service GB? Since September 2015

What was your first paid job? KFC/fudge maker

What one thing would you like to achieve before you retire? Full size Astroturf pitch at AFC Corsham

Outside of Fleet Service GB, what would your dream job be? England football team manager

Who in the world would you most like to meet? Lord Lucan

If you won the lottery how would you spend the cash? Helping people’s dreams come true

Not a lot of people know that …………………… I’ve met George Best and got his autograph to show for it