Consulting » Benefits – On The Road Again

One of the government’s frequently stated aims is to get us all to use our cars less and public transport more. So it should follow, then, that the government would push to get people out of their cars and on to public transport to reduce the adverse environmental impact of vehicle emissions and motorway construction.

One reasonable step toward reduced car usage would be a sustained attack on the company car through the tax system. After all, fleets account for at least 40% of all new cars sold in Britain each year. So it’s only logical that there should be a reduction in the number of cars on the country’s roads once the company car is no longer a perk.

But far from taxing drivers out of company cars, the CO2 emissions tax basis for assessing benefit in kind taxation is actually bringing company employees back to the company car. Low mileage drivers actually end up paying less tax under the new regime than they would have under the old one, provided they choose low emissions vehicles. The emissions regime, in other words, is a company car-friendly tax policy.

This may leave some members of Friends of the Earth scratching their heads in amazement at what seems like a disconnect in government thinking, despite Tony Blair’s famous slogan about ‘joined-up government’. However, Stuart Walker, a spokesperson for vehicle leasing company LeasePlan, observes that the company car phenomenon provides the government with a wonderful way of influencing the kinds of vehicles that populate British roads.

“When you think it through, it is not in the government’s interest to kill off the company car,” he says. Because they tend to be fully maintained and newer, company cars are generally cleaner from an emissions standpoint than private vehicles.

Far from wanting to dissuade employees from taking up the company car option, the government would welcome a modest increase in the numbers opting for this perk. “Whether there is a significant broadening in company car takeup to new categories of employees who were not previously offered company vehicles remains to be seen. All the research we have done shows that the company car is still the top company perk in the UK,” says Walker.

LeasePlan’s research shows that 97% of the drivers interviewed across all LeasePlan fleets throughout Europe rated the company car as the number one perk. “Drivers value the company car ahead of other key benefits, such as pensions, medical insurance, profit sharing and share options,” he says.

Mike Waters, business development director at contract fleet company Arval PHH, explains that companies now view the car as just one element in an overall flexible benefits package for eligible employees. “Employees will often choose a lower emissions, smaller vehicle and bump up some other benefit with part of what would have been an allowance on a larger vehicle,” he explains.