PROVECTA INTERVIEW: 'Keep it simple and make it revenue neutral'
01 November 2007
Nick Sutton, boss of Employee Car Ownership scheme specialist Provecta, tells Tristan Young how the Government should introduce changes to AMAP rates - once it gets around to making a decision
The lack of a conclusion to the HMRC-led Government investigation into AMAP tax-free mileage rates, and the way they power the grey fleet market and Employee Car Ownership schemes, has done nothing to dampen business at Provecta.
While ECO schemes were given the all-clear by Alistair Darling in the Pre-Budget Report earlier this month, the investigation still continues into AMAP rates, which are integral to ECOs, but this uncertainty doesn't phase Provecta's boss Nick Sutton: "We've picked up more business this year than in the previous two years when the ECO review started," he states. "And we're not surprised HMRC is reviewing ECOs - it's a new product. I am surprised it's taken them two years.
"Some people are waiting for a decision, but a lot of companies are just going ahead. They've taken a view on ECOs [and say] they'll change if the review makes it not right for them."
According to Sutton, a mix of companies use ECOs, but all have one thing in common - the scheme must be at minimum cost neutral. Beyond that, a respected Monks report claimed half of all businesses choose an ECO scheme to offer their employees more choice - and therefore use it as a staff retention tool.
Sutton believes the reason for the delay in working out how, or even whether, to tackle AMAP rates is because of the unknown numbers involved. Indeed, the very term 'grey fleet' hints at the nebulous nature of what's involved.
According to Provecta's research there are between four and five million people using AMAP rates to fund using their own cars on company business. This is far greater than the 1.2 million paying company car tax. The result is that any change to AMAP rates could have a far greater impact on the electorate and car driving population than a change to benefit-in-kind taxation.
And while HMRC knows something of who's using AMAP rates, it knows nothing about what those people are driving.
Whatever the answer, it must begin as "a simple solution, then they can use real stats to change it in three to four years' time", says Sutton.
“We've picked up more business this year than in the previous two years when the ECO review started. And we're not surprised HMRC is reviewing ECOs - it's a new product”
Nick Sutton, Provecta
"HMRC has stated that ECOs are not losing them revenue, so pushing people to company cars isn't what they're after.
"If the Government is saying it's an environmental issue and if they're serious then they have to incentivise. If low CO2 [promotion] is significant then the car makers will see people buying sub-120g/km cars so they'll make more of these cars available."
Sutton is clear on how the Government should go about introducing any changes to AMAPs.
"It has to be revenue neutral so people driving Porsches and other high CO2 cars will be subsidising others.
"The Government needs to install a system, then keep stretching the tape, just like with company car tax. They have to drive the reduction. If the Government doesn't promote it, it won't take off.
"If it's seen as just a new taxation then people will move away from new cars. They need to bring the grey fleet into this in a structured environment."
Sutton has also looked further ahead, and suggests there could be a system to tax people that would work for whatever technology the Government wants to promote.
"I suspect the eventual system will be road pricing because they can incentivise they cleanest fuels that way."