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Chancellor's BIK rate silence forcing fleets to order company cars 'blind'

Posted by: Fleet Licence Check - Monday, April 11, 2016

Seeing as the Chancellor of the Exchequer George Osborne failed to reveal Benefit-in-Kind rates for 2020/21 in his latest budget, fleets are facing the prospect of ordering company cars ‘blind’ without knowing how much tax they will need to pay.

The only way fleet operators and their drivers can plan ahead is by looking at Treasury revenue forecasts contained within the budget documents, which suggest rates will rise by three percentage points. As a result, BIK on a 109g/km diesel car would rise from 21 per cent in 2016/17 to 31 per cent in 2020/21.

Industry reaction

Despite the fact 71 per cent of respondents to a Fleet News poll felt the budget contained good news for the fleet sector, several were left angry and frustrated by George Osborne’s omission. Paul Tate, commodity manager at Siemens, said it would be impossible to give employees the full implications of taking a certain vehicle.

“It’s imperative the figure is released as soon as possible, to allow employees to make an informed choice and not put more pain on businesses if there is a sudden sharp increase,” he said.

Paul Brown, fleet manager at Enserve Group, shared this opinion and said that managing a fleet successfully was in large part dependent on knowing future tax liabilities.

“You can fix your budgets on contracts and contract terms,” he said. “You know that you’re going to have that fixed cost against your four-year contract. It’s the same for the individual who is taking the car – they don’t want to take a car and then find out a year later the goal posts have changed.”

The potential for change

While fleets could tentatively plan for a three percentage point increase in 2020/21, there is the potential for a change to company car tax, as the government outlined incentives for ultra-low emission vehicles (ULEVs) back in 2013.

“The current tax regime has been around long enough,” said Matthew Walters, head of consultancy services at LeasePlan UK. “If there is a time for change I would suggest it is probably now.”

But in light of the Volkswagen emissions scandal, which many thought would cause a shift in focus from CO2 to nitrogen oxides (NOx) for company car tax, any change should put fleet operators first.

“It needs to be a measured and calculated change that gives people the opportunity to make the right choices, or more informed choices, in their company car,” added Walters.

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