UK - Company car tax reforms have saved businesses £35m a year and removed 200,000 tonnes of carbon from the environment, a government report claims.
But consultants believe the changes could signal the end of traditional company car schemes.
The Inland Revenue evaluation report found that employees and businesses had benefited from the “less mileage-based” system introduced in 2002. The new taxation method scrapped incentives which encouraged employees to drive more miles to fall into certain tax brackets.
The report said that prior to the change, a driver who had completed 2000 miles in February, had a strong financial incentive to drive an additional 500 miles.
The new system takes account of a car’s environmental impact with higher taxes for higher carbon emissions.
The government claims the reform reduced business travel in company cars by 400m miles in 2003, while £35m in compliance costs was saved by employers, which are no longer required to keep records of business mileage.
Economic secretary to the Treasury John Healey said: “This reform has benefited the environment and company car driver, and saved administrative costs for business. It’s a win-win situation for all concerned.”
But Mercer Human Resource Consulting claims the new tax system could signal the end for traditional company car schemes and has prompted 5% of companies – itself included – to scrap the option altogether.
Mercer senior consultant David Wreford said the changes had led to employees “flexing down” in favour of more economical cars and taking a cash alternative instead.
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