Is time up for the traditional company car?

6 February 2018

With uncertainty and headwinds on the horizon for 2018, much attention is currently being focused on cost reduction strategies within the UK’s motor retailers.  Some of the largest businesses such as Vertu Motors have issued statements confirming that they have implemented a determined cost-cutting exercise which left ‘no stone unturned’.

One of the most significant costs within a dealership are those of running the vehicle fleet.  Associated with that, of course, are the taxation consequences for both employees and employers.  Increasingly draconian tax consequences are in place meaning that these costs are set to rise significantly over the coming years.

2017/18 2018/19 2019/20 2020/21
CO2 banding % 26% 29% 32% 33%
BMW 320d M Sport Touring 123g/km E’ee cost 40% £3,663 £4,085 £4,508 £4,649
List price £35,220 E’ers NI 13.80% £1,264 £1,409 £1,555 £1,604
Total   £4,927 £5,494 £6,063 £6,253
CO2 banding % 20% 22% 25% 26%
Ford Focus Titanium 1.0 Ecoboost 108g/km E’ee cost 40% £1,763 £1,939 £2,203 £2,292
 List price: £22,035 E’ers NI 13.80% £608 £669 £760 £791
Total   £2,371 £2,608 £2,963 £3,083

The above table illustrates the tax costs of running two examples of company vehicles for 40% tax payers.  In the case of the BMW, costs are set to rise by 27% across the next four years to a total of over £6,253 per annum. Similarly, the Ford will also see an increase in costs of 30% over the same period.

One of the ways to mitigate these tax costs is to consider the possibility of the employee owning the vehicle. There are various possible ways to consider this generally under the heading of ECOS or Employee Car Ownership Schemes.  A well implemented scheme can result in significant savings for a business, whilst at the same time sheltering employees from further tax increases.  A recent example study carried out by UHY indicated potential savings of £3,500 per vehicle, per annum.  When this is then multiplied across the total size of the vehicle fleet, the potential cost savings can be staggering.

Set out below for reference is a table showing how the CO2 bandings are set to move in the coming years.

Scale Charge Calculator
Taxable % of P11d Value
CO2 g/km 2017/18 2008/19 2019/20 2020/21
0-50 9 13 16 see note below
51-75 13 16 19
76-94 17 19 22
95-99 18 20 23 24
100-104 19 21 24 25
105-109 20 22 25 26
110-114 21 23 26 27
115-119 22 24 27 28
120-124 23 25 28 29
125-129 24 26 29 30
130-134 25 27 30 31
135-139 26 28 31 32
140-144 27 29 32 33
145-149 28 30 33 34
150-154 29 31 34 35
155-159 30 32 35 36
160-164 31 33 36 37
165-169 32 34 37 37
170-174 33 35 37 37
175-179 34 36 37 37
180-184 35 37 37 37
185-189 36 37 37 37
190+ 37 37 37 37
3% supplement ( 4% from 1/4/18) for diesel up to max 37% (until Apr 2021).
For 20/21, cars with emissions between 1-50g/km will be assessed based on their zero emissions range. A further scale will apply for cars with emissions between 51 and 94 g/km, starting at 15% and increasing by 1% for each additional 5g/km.

If you would like to discuss the implications of this blog or for further information about how an ECO scheme could benefit your dealership, please contact me or your local UHY contact. Alternatively, you can read more about ECO schemes here.

To read more of our automotive related blog posts, please click here.