Fleet special: blazing a trail

fleet special

The announcement in the last Budget, over the reduction from 2008 in company
car taxation for vehicles that have a sub-120 CO2 emission, should be considered
a very exciting development. It is clear that the chancellor sees this
announcement to be a carrot to the motor industry in his attempt to persuade
them to develop such a vehicle. At the moment, there is no vehicle that fits in
this category. It will be surprising if the motor industry does not take up the

We have seen the changes to company car taxation that came into being in 2002
make the motor industry sit up and respond, by producing vehicles that have low
CO2 emissions with the aim of minimising the taxable benefit and making it
attractive to the company car driver.

Despite the population of company cars reducing (according to the latest HM
Revenue & Customs evaluation), it is still an important market. It will be
vital, however, that the sub- 120 CO2 emission vehicle developed is ‘fit for
purpose’ when it comes to business use. In other words, it is essential that
this vehicle will be safe and suitable to use by those employees who travel on
business. This is an important consideration, given the concerns over the duty
of care responsibilities employers must fulfil for their employees who travel on


We should not miss the fact that the chancellor’s announcement was a big
carrot to employers, as well as the motor industry. It’s true to say ‘green
issues’ are constantly in the news today and, with this in mind, it’s important
that employers carefully consider their fleet policy and what they do about
those employees who use their own vehicles on business travel.

What are employers doing to try and help the environment by going greener
with their fleet? This issue will need to be addressed in the annual report of
the company. It’s something, though, that has not been often considered by
employers in the past, with many simply determining their fleet policy based on
the level of volume discount they could negotiate on a specific model of
vehicle, or the type of vehicle they needed to offer to tempt the right type of
employee into their organisation.

Many employers are not yet prepared to switch to vehicles that run on
alternative fuels, because the cars are in their early days of development and
haven’t yet proved themselves. There are concerns over future support for these
types of fuels. Coupled with this is a real fear that these alternatives could
just simply be five-minute wonders and leave the employer with a real financial
cost in the long term.

There is, however, a real interest in companies for coming up with green
solutions, perhaps opting for diesel cars or vehicles with lower CO2 emissions.
This is really the first step for employers, but they also need to consider how
they tempt employees to choose a car that is more environmentally friendly. One
easy way is to only reimburse mileage for business travel based on a car that is
CO2-friendly (‘benchmark vehicle for the grade’). If employees opt for a vehicle
that is less ‘green’, then it falls to the employee to make up the difference.


Employers also need to reconsider the provision of free fuel. This is an open
invitation to employees to do more private mileage and is therefore very
unfriendly in this green age. Having said that, for employers who already offer
free fuel, it is not easy to give it up.

Then there is the issue of those employees who opt out of a company car and
buy their own vehicle, which in many cases is anything but green. This again is
a decision to be considered if employers are really going to contribute to the
green cause.

Clearly, besides the above issues, there’s a need to ask whether all that
business travel is necessary and whether more homeworking and conference calls
would be a better option. Are there alternative ways of getting to that business
destination other than by car? It’s up to the board of directors to seriously
consider its position and what it intends to do to aid a greener environment.


1 Introduce an initiative of limiting business travel. With
all the advances we have in technology today, do you really need to travel so
much? Think of your carbon footprint and consider promoting a policy of using
conference calls instead of a face to face meeting

2 Is it possible for the employee to use public transport
instead of their company car? In large cities you often get around much quicker
on buses or the underground than you do in your own car or a taxi.

3 Promote car sharing by employees. There are significant
tax incentives you can use in this regard

4 Consider whether there are opportunities to encourage more
home working. In many cases it can often mean happier, more productive staff,
not to mention less impact on the environment

5 For employees who have opted out of company cars, consider
requiring them to use a hire/pool car for business travel. It might be that the
hire/pool car will be greener than their own vehicle

6 Look at whether it’s sensible to introduce a policy to
limit the level of permitted commuting mileage

7 Introduce a policy of greener cars in the car fleet. Think
alternative fuels and diesel

8 Set a policy that discourages those employees to take less
green vehicles than the benchmark for their particular grade. This could be to
limit the fuel reimbursement rate to that required for the benchmark car

9 Considering buying out the provision of free fuel. The
provision of free fuel encourages more private mileage

10 Consider the replacement cycle of your company vehicles.
This will get greener cars in to your fleet sooner, with the continual d
evelopment of greener vehicles if you shorten the replacement cycle

Alastair Kendrick is tax partner at Wilder Coe chartered accountants

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