Fleet special: the engine room

What should companies be doing in the wake of the Budget?

Alastair Kendrick: The gun has gone on manufacturers to
start coming up with a car that meets the requirement of the new 10% tax band.
They have until 2008 and it will be good to see if they come out with that.
Generally companies should be reviewing the type of fleet they have and whether
they have the sums right with regard to the amount of tax that the employee will
pay on those cars. Historically, a lot of corporates spent time negotiating
deals with particular manufactures to get large discounts. Now they need to make
sure that those deals are not compromising their employees because of the cars’
C02 emissions.

Sean Bingham: Fuel costs are really what we’re talking about
as being one of the major headaches and that’s an area that corporates can get
real rewards. It’s a question of looking at what are you using the vehicles for,
and how much money you are spending on keeping them on the road. We did some
analysis on fuel costs and for a 200-strong car fleet. With one fleet we were
looking at, for every one mile per gallon improvement they could get in fuel
consumption, they were saving nearly £10,000 a year net.

Is there a lack of awareness about the benefits to be had under the
emission-based tax regime?

Gerald Gornall: Potentially yes, in terms of which vehicles
have which emissions and the usefulness of certain tax breaks for company cars.
Alastair’s view on whether this 10% rate might see employers offering company
cars to a wider population other than the traditional company car and cash
allowance population is interesting, because it could be quite an attractive
company benefit if manufacturers can make those emission levels.

Does encouraging more company cars defeat the government’s
eco-friendly aims on C02 emissions?

Sean Bingham: It’s a question of encouraging cars in the
right way. For instance, in 2005, the average C02 emissions of the vehicles we
put out were 164gm/km, which is pretty low and the vast majority of that has
been achieved by the rise of diesel uptake. For the past year and a half, 70%
plus of vehicles we’ve provided to customers were diesel and that’s the reason
we’ve seen that.

Gerald Gornall: There has to be a concern. The tax on
company cars has fallen, equally there is a lot more people taking cash,
therefore the tax take should potentially put staff out – but it really depends
on how the government views that tax take.

Will government succeed in meeting its target of increasing the use
of alternative fuel cars?

Sean Bingham: They are sending out mixed messages, I’m
afraid. The current technology is largely based on liquid pretroleum gas or
compressed natural gas. There was a freeze on duty increases, but that freeze
has stopped and government actually announced another duty increase in this
Budget. If you look at the way car-makers have responded to government policy,
all of the major manufacturers have shied away from producing factory-converted

With a lot of employees opting for cash, is that possibly a greater
cost to the company than actually dealing with the cars?

Gerald Gornall: In my experience there are two areas, one is
actually accessing the right amount of cash and the other part is administering
those drivers that are taking cash. Quite often I’ve found that cash allowances
have been set too high. Three or four years ago the common conception was ‘Ok,
they’re going for cash I can forget about them’. Now, if they do any kind of
business mileage, you need to keep control of those drivers by making sure that
they have the right vehicle, it is insured, it passes its MOT and is serviced
properly. So there’s two aspects in terms of the cost. And quite often it does
cost more than providing the car.

When are the best intervals for reviewing company car

Alastair Kendrick: It depends on the size of the fleet, as
to how often you should look at it. I think most companies find that it is a big
item of expense and should be examined on a regular basis. I think that it is
imperative that you look at your policy now, particularly, and most importantly,
with regards to the health and safety issues.

This weeks’s experts

Sean Bingham is director of New Business at Bank of Scotland
(Vehicle Finance)

Alastair Kendrick is tax partner at Wilder Coe

Gerald Gornall is director of Intelligent Fleet Ltd

Chaired by Gavin Hinks, the editor of Accoutancy

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