PracticeConsultingA move away from company cars in 2002

A move away from company cars in 2002

Proposed changes to the Inland Revenue Approved Mileage Rates (IRAMR)as outlined by Gordon Brown in his pre-budget speech, may encourage some employers to go for the personal option for drivers of 'working cars'.

According to fleet managament company Alphabet (GB), proposed changes to IRAMR would mean that companies who have fleets with engines sizes greater than 2001cc should move away from traditional fleet car provisions to personal solutions.

This would make it cheaper for employers to adopt the cash alternative to a company car, without negatively impacting the drivers. As the majority of these drivers fall into higher tax rate brackets, relatively higher BIK savings would offset the reduced reimbursement rates.

Under the proposed legislation for April 2001, lower reimbursement rates would change to 40p (from 36p) for the first 4,000 miles, and 25p therafter. For a typical company car fleet (under 2000cc), a move to personal solution would not be of any greater appeal.

In April 2002, a single reimbursement rate of 40p has been proposed for the first 10,000 miles, and 25p thereafter, regardless of engine size. In this case employers would be better off if they maintained their cash allowances for vehicles under 2000cc.

However for cars with engines great than 2001cc, a move to a personal option may be the best solution, since the company would pay more under cash supplements, while the driver would pay more in contribution compared with current IRAMR rates.

Plans to retaincar mileage system welcomed

The trick to making fleet cars pay their way.

HM Treasury: Pre-Budget report

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