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From April 2008 the tax charge that applies to the lowest CO2 emission cars (under 120 g/km) will reduce from 15% to 10% of the cars list price. However, over two thirds of companies are yet to implement a green company car scheme.
The change means that a basic rate taxpayer with a company car costing £8,000 will pay tax of £160 per annum for a car that is insured and taxed, with no residual value risk. European legislation now requires motor manufacturers to reduce the average CO2 emissions of the cars they manufacture. The introduction of these advantageous tax rates in the UK should prove = to be a real incentive to achieving their targets.
Additionally, since October 2007 company directors have had a legal obligation to consider the interests of their employees and the impact of the company's operations on the community and the environment. Further still, they also need to demonstrate their actions through the company's business review.
As the PwC Monks Annual Company Car Survey shows, the company car remains an integral part of the reward package. The typical salary at which a car is provided as a standard benefit is around £35,000, with 90% of companies also offering a cash alternative.
All employers understand the difficulty of changing employee behaviours. Status drivers generally want to drive prestigious cars and some may feel that additional tax costs are a small price to pay. However, prestige comes in many forms and encouraging lower CO2 emission cars amongst employees is a good demonstration to all stakeholders that the organisation is committed to a sustainable environmental impact programme.
Providing a second, or even a third, company car for family members that is tax efficient is also viable as there are no extra tax costs on additional cars. For employees required to spend significant time ‘on the road’ an employee car ownership scheme may be a better option. Although these arrangements fall outside of company car scale charge provisions, employers still have the opportunity to promote lower CO2 emission cars through the way the scheme is priced and run.
The concept of salary sacrifice is now well known to many employers operating childcare voucher and other optional benefit schemes for staff. Extending this approach to provide access to low CO2 emission cars to a wider population, who currently don’t qualify for a company car, is an increasing trend. Care is needed to manage the costs of leavers and insurance but the financial benefits to staff and employers alike are considerable:
Employers can:
Employees can:
Additional benefits are that employees drive safe and environmentally friendly cars that are insured, repaired and maintained, thus reducing corporate risk and enhancing the employers' reputation.
So, the pressures to provide more environmentally friendly means of transport for employees are becoming ever stronger, and evidence suggests many organisations are reviewing and changing their company car provisions as a result.
For further information on this topic please contact Gary Hull
