1.5bn tax bill for fleet operators and drivers

“Chancellor George Osborne has delivered company car operators and drivers a tax increase of £1.5bn over the next five years to be generated by increasing fuel charge payments for drivers and benefit-in-kind rates, and the reduction of capital allowances for businesses.

Although the industry was aware of some of the announcements, the budget did contain a few unexpected shocks. The headline was that the Treasury will gain an extra £845m generated from the increase in company car drivers’ Benefit in Kind (BIK) rates for three years from April 2014.

Other changes included the plan to generate £575m following significant changes to the capital allowance regime, plus £35m in revenue from the fuel benefit allowance for people given free private fuel by companies as the Treasury looks to discourage this practice.

It was certainly the most significant Budget for business car operators since the change to the CO2 based tax system nearly 10 years ago.

Given the state of the economy these increases were expected to a certain degree, but the general industry view is that fleets have been dealt with quite harshly.

We anticipate that this hike in taxation will result in more and more SMEs looking to reduce costs in other areas of the fleet such as acquisition, funding, maintenance, insurance and fuel.

Whether businesses operate five or 500 vehicles now is the time to review your existing fleet arrangements and assess where these additional costs can be accommodated.”

Marc Mcloughlin, Director
Key Fleet Automotive