15 January 2018
According to the Office for National Statistics (ONS) there has been a gradual decline in the number of company car drivers over recent years. In 2007/08 there were around 1.07 million drivers – which had reduced to approximately 960,000 by 2015/16.
However the total taxable benefit in kind values (and consequent tax generated) have increased during the same period from £3.95 billion (tax generated £1.3 billion) for 2007/08 to £4.32 billion (tax generated £1.48 billion) for 2015/16.
The principal reason for the above correlation is that the average taxable value of company cars has increased from £3,700 per vehicle in 2007/08 to £4,480 per vehicle in 2015/16. This 21% uplift over eight years would be driven by both list price increases – and the impact of CO2 banding changes.
For 2008/09 the CO2 bandings were based on a calculation that started with the emissions in grams per kilometre before deducting 135 and multiplying the result by five. The rounded down number would then be added to 15 (for petrol cars) or 18 (for diesel cars) to give the percentage that should be applied to the list price to calculate the benefit in kind value.
However for 2009/10 onward, this calculation differed, as shown in this table: Company car drivers.
The table clearly demonstrates that percentage rates have been increased over the years for all vehicles – except those with the lowest emissions. Whether these increases are driven by the Government altruistically attempting to change manufacturers’ practices (or whether it is a cynical attempt to raise more revenues – given that most company cars are held on three year agreements) the cost to the drivers has kept on going up.
The inexorable squeeze on company car drivers is going to increase over the next few years. By 2019/20 the lowest emission category will increase from the current 9% charge up to an eye watering 16% rate. Other categories will similarly increase by 2019/20 – so that the highest 37% banding starts at 165 grams of CO2 per kilometre. In addition the Government has announced recent changes for the taxation of certain ‘salary sacrifice’ and ‘cash equivalent’ schemes for company car drivers – plus the diesel supplement is going up by 1% for certain vehicles from 2018/19.
Given the forthcoming changes in company car taxation – now is probably a good time to review your arrangements for providing vehicles to staff. Please contact a member of the automotive team if you wish to explore the options available.
If you would like to discuss the implications of this blog, please contact me or your local UHY contact. Alternatively, if you would like to read more of our automotive related blog posts, please click here.