Paul Barker's blog: 19 March - Budget 2015: The BusinessCar verdict
19 March 2015
Controversial as it may be, I feel like the chancellor has mugged much of the fleet industry, which has been blinded by a brief and slightly disingenuous mention of generosity towards company car drivers adopting ultra low-emission vehicles, and either hasn't noticed or isn't bothered about the sharp rise in BIK payments for the overwhelming majority of drivers.
Twelve months ago I wrote in the wake of the 2014 Budget that the BIK increases were "getting to draconian levels", so I'm not sure how to word my thoughts on the three percentage point jump in BIK payments that will come with the April 2019 tax year.
At that point, someone driving a 94g/km car will be in the 22% BIK band. As I write, that same car, if it's a petrol, is in the 11% BIK band. The long-overdue removal of the three-band diesel surcharge next year disguises some of the increase for diesel cars, but I'm genuinely concerned about what the taxman's latest £340m grab from company car drivers, on top of the BIK increases worth £720m to the Treasury announced last year, will do to the appeal of company cars.
For example, we have a 94g/km Ford Mondeo 1.6 TDCi in the car park at the moment. This tax year, the annual BIK for a lower-rate tax payer is £642.
Just over four years from now, that will rise to more than £1000. At what point does your average fleet driver decide they've had enough of giving the chancellor so much money, and hand back their car? It may not be the most sensible financial decision - running a private car is full of costs hidden to a cosseted company car driver, but with subjects as emotive as combining tax and cars, rationality may not always win through.
And that opens up a whole can of worms in terms of duty of care, business reputation and environmental considerations that company cars help keep under control. It's odd that, with one or two exceptions, notably GE Capital and the BVRLA, the budget responses from the industry focused on the low-emission side of things, rather than the impact on the vast majority of the industry.
Then there's another issue I raised a year ago, that is now even more pertinent. Throughout recent history, drivers with the aid of car manufacturers have been able to mitigate the BIK rises by choosing more efficient models. Now there are plenty of sub-95g/km cars available that meet fleets' needs, but the only way of dropping to a lower BIK band is by getting to 75g/km, which is a hell of a jump when everything above it progresses in sensible, achievable 5g/km steps.
Especially as the only car you don't have to plug in that gets below 76g/km is one derivative of the Toyota Yaris Hybrid, which, like plug-in vehicles, isn't particularly well-suited to the higher-mileage drivers in particular that have been left with nowhere to go to reduce their company car tax bills.
As people more intelligent than me have pointed out, there has been a feeling that the Government got caught out by the pace of change in the car industry, not realising how quickly CO2 emissions would fall, and now it's making up for that by switching from company car tax being a green incentive to being very much about raising revenue. Plus, less incentive to take a lower-emission car won't help the 2020 EU target of average vehicle emissions dropping below 95g/km.
Like many things the Government does, there could be unintended consequences. There's only so far company car drivers will be milked before they decide enough is enough. I'm not sure we're as far from that scenario as many in the industry seem to think.
Overall, the decisions regarding company car BIK leave me feeling the Government doesn't really understand the way companies, drivers and the car industry works, and has just taken a balance sheet approach of making the numbers bigger without comprehension of what effect that will have in the real world.