ACCORDING to the European Commission cars create 12% of the total European Union emissions of carbon dioxide (CO2), which is the main greenhouse gas. EU legislation has therefore set its sights on improving the fuel economy of cars with similar targets being set for vans. For example, by 2021 its target is to reduce CO2 emissions by 40%. By then the emissions target for all news cars will be 95 grams of CO2 per kilometre (1.6 miles), with a fuel consumption target of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel compared to the 2015 target of an average of 130 grams of CO2 per kilometre.
For now these targets don’t relate to companies running fleet cars, but to the manufacturers that make them and they can be penalised for failing to achieve them. “If the average emissions of a manufacturer’s fleet exceed its limit value in any year from 2012, the manufacturer has to pay an excess emissions premium for each car registered”, says the European Commission’s article on ‘Reducing CO2 emissions from passenger cars’. It says the penalties for exceeding these CO2 targets range can cost car manufacturers anything from €5 for the first g/km of exceedance, €15 for the second g/km, €25 for the third g/km and €95 for each subsequent g/km.
Enticing tax breaks
Yet while there aren’t any non-compliance penalties or taxes being imposed on other companies’ fleets, Nigel Morris, employment tax senior manager and head of car fleet consulting at PwC, says tax breaks are a very enticing incentive for developing and managing a green management strategy: “Within the public sector particularly, the incentives are there to use salary sacrifice to provide an added value benefit for their employees, which means employers can use their procurement power to provide a vehicle in a tax efficient way.”
He adds: “The evidence shows that the tax breaks have been beneficial, and HMRC are looking to address the tax advantage that salary sacrifice can deliver to close it off.” This tax advantage is gained because salary sacrifice in this context occurs when an employees are offered a car for a reduction in salary, and as a result their employers save money by paying less National Insurance and tax.
“The taxation of the car, due to the benefit in kind tax rules, may mean that the tax on the car is less than the National Insurance and tax on the salary of an employee. However, that previous tax advantage is being eroded by existing increases in company car taxation and the tax gap is reducing greatly due to the way that HMRC has changed company car taxation”, he explains.
HMRC: Closing the gaps
With the gaps closing, he also warns that something quite radical has to happen post-2020 to avoid ending up with an expensive company car tax regime. He also fears that much of the work that has been done to reduce CO2 emissions in new cars could be reversed. “If we are going to make company cars too expensive, it’s going to have an impact on CO2 emissions because employees might buy their own second-hand car instead that has a higher CO2 rating, and which offers lower miles per gallon.” HMRC and other tax authorities therefore have a fine balance to strike between tax and encouraging firms to continue to adopt green fleet management strategies for the benefit of the environment.
Yet companies should adopting a green fleet management to reduce their emissions and fuel consumption – not just because it’s good for the environment or saves them money, but because it offers some corporate social responsibility (CSR) benefits – allowing customers to perceive a brand as being environmentally sound. This can lead to increased brand loyalty, sales and profitability over the long-term. “Green fleet management or strategies are key in terms of CSR, and the reduction of the impact on the environment with regards to CO2 is essential, but you also need to balance it with the business needs”, advises Richard Hipkiss, operations director at Fleet Operations.
He adds: “There is no point in offering an electric car, for example, to someone who has journeys of 100 miles or more when the vehicle’s range is just 80 miles. The network for electric cars is getting bigger and we are seeing some steps forward with motorway networks and retail outlets, but in rural areas you won’t find fast charge points. A fast charge can take between 30 minutes and 4 hours.”
So there needs to be some forethought into how to develop a green fleet management strategy, and fleet management solutions such as those offered by his company, Chevin Fleet Solutions, Quartix and TomTom can enable companies to achieve green targets by providing them with real-time data. These