New figures also reveal falling carbon emissions
The extent to which the company car is valued as the number one Benefit-in-Kind in the UK has been revealed by the latest figures from Her Majesty’s Revenue & Customs (HMRC).
Cars, car fuel and private medical/dental insurance remain the highest value Benefit-in-Kinds (BiK) in the UK, according to the latest HMRC data, which also shows that the number of drivers paying BiK taxation on a company car was 940,000 in 2013/14.
This was the same number as for 2012/13, although a slight fall on 2011/12. In 2005/6, before the credit crunch, there were 1.14m company car drivers paying BiK taxation in the UK, according to HMRC.
Company cars contributed the most in BiK taxation of any of the taxable benefits, equating to a taxable value of £3.7bn or 50% of the taxable value of all benefits.
Company car emissions falling
The HMRC data also revealed emissions levels for company cars which mirrored the findings of many UK fleet management and leasing companies, including CLM, in showing a strong downward trend.
For example, in 2012/13, the last full year of HMRC data, some 91% of company cars emitted less than 165g/km of CO2, up by 4% from the year before, while the largest concentration of drivers (21%) were in the 115-124g/km emissions bracket.
Meanwhile, some 20,000 drivers (2%) were taxed on a car model with less than 95g/km CO2 emissions, and 10,000 drivers (1%) were taxed on a model with 225g/km or over.
The HMRC data also showed the extent of the reduction in emissions across the company car parc. In the tax year 2002/03, some 58% of the UK company car fleet had emissions in excess of 165g/km, but ten years later that had fallen to just 9%.
And between 2011/12 and 2012/13, the number of company cars emitting less than 145g/km increased by 20% while cars emitting more than 145g/km decreased by 32%.
HMRC data also showed the strength of diesel power in the company car market by revealing that 81% of company cars used diesel fuel in 2012/13, with just 19% using petrol. Looking back ten years to 2002/03, only 33% of company cars were diesels.
Fall in ‘free’ fuel continues
The number of employees receiving so-called ‘free’ fuel has fallen by more than a third (39%), HMRC figures show, while the BiK tax take on such fuel totalled £740m in 2013/14.
HMRC suggests that the reduction in car fuel benefit is a likely reflection of rising fuel prices, causing employers and employees to look more carefully at whether the fuel benefit results in a tax charge in line with its true value.
Almost a quarter of company car drivers, around 200,000, still continue to use fuel paid for by their company for private use, although virtually all would save money by giving up the ‘perk’, according to calculations from fleet experts.
Car fuel benefit represented 10% of the total taxable value of all benefits in kind, according to HMRC.
Fewer grey fleet drivers paid more than AMAP rate
The number of grey fleet drivers being paid more than the Government approved mileage rate has almost halved in the past five years, according to the HMRC data.
In 2008/09, there were 560,000 employees being paid more than the Approved Mileage Allowance Payments (AMAP) rate, but by 2013/14 – just five years later – that had fallen to 290,000, according to HMRC.
From April 2011, the Approved Mileage Allowance Payments (AMAPs) rate was increased from 40p to 45p per mile for the first 10,000 miles of business travel in a tax year.
This meant that drivers receiving mileage allowances in excess of AMAPs were charged tax and National Insurance contributions on the difference between the payment offered by their employer and 45p.
The falling number of drivers being paid more than the AMAPs rate has been caused by a number of employers, in particular local authorities, reducing their mileage allowances, said HMRC.
Critical recruitment tool
With the numbers of company cars in the UK stabilising, according to the HMRC data, it’s clear that it still remains a critical recruitment tool.
A recent survey of 1,000 employees found that 64% of them said a company car would be an important factor in their decision to take a new job or not.
Receiving a company car was also seen as a mark of achievement by 45% of company car drivers and 32% of employees with private cars.
The research highlighted how the car remains one of the most cost and tax-effective ways of recruiting and retaining the best staff and, while it remained a vital tool for work, it was also a highly valued employee benefit.
If you have any questions about the appropriate policy for your company car fleet, then please get in touch.