The Fleet Agenda for 2019
2018 was seen as a year of unprecedented change and uncertainty in the fleet world. Many will be hoping that that the beginning of the new year marks a change in that climate and a return to some level of stability and normality.
In this post we take a look at the key topics and issues that are likely to characterise 2019 for fleet operators, and whether this year will prove any less challenging.
One topic that could impact on almost all areas of UK business life, including fleet provision, is Brexit. While the uncertainty of 2018 continues unabated, there are a number of things that fleet decision-makers can and should be considering in preparation.
Perhaps the most apparent is that, should the UK leave the EU in March 2019 without a deal, there are likely to be extra steps required when taking a vehicle onto the continent or when hiring a vehicle in the EU.
Currently, UK driving licences are valid for work and leisure travel anywhere in the bloc. Under a no-deal scenario this may no longer be the case and an International Driving Permit (IDP) may be required to drive legally. Being aware of the procedures for applying for an IDP and preparing to communicate these to drivers could prevent problems post 29th March.
Similarly, insurance policies that currently cover vehicles for European-wide travel might become more restrictive. It would therefore be prudent for decision-makers to check potential impacts with intermediaries or insurers well before the exit date.
The Department of Transport has provided guidance notes on this topic which can be found here.
Another direct impact of Brexit could be temporary restrictions in the supply of vehicles from EU manufacturers. The potential trade issues behind this are extremely complex and will affect the flow of all types of goods. However, fleet decision-makers can begin to make contingency plans, such as looking at the options for contract extensions or the use of short and mid-term rental to cover any gaps.
Alternative Fuel Vehicles
2018 saw a significant increase in the number of organisations offering alternative fuel vehicles as part of their perk choice lists and as business need cars. Punitive tax treatment and the uncertainty over future Clean Air Zones have contributed to declining diesel registrations. This change is likely to accelerate in 2019 and beyond.
Recent research by CLM* has revealed that, for accelerated take-up of AFVs, 2019 needs to be a year of education and enhanced familiarity with the new technologies, This, alongside greater vehicle choice (25 BEVs or PHEVs will be on sale) and ever-increasing vehicle range, will be the trigger to increased driver consideration of AFVs as their everyday transport.
With the availability of 100% First Year Allowance on vehicle emitting 50g/km CO2 or less until at least 31st March 2021, there are also considerable incentives for businesses to offer these vehicles.
As with all vehicle provision, fleet managers must look at the overall suitability of AFVs in meeting business mobility needs, as well as their whole life costs. For plug-in hybrids (PHEVs) in particular, it’s important that these are not provided purely as a method for reducing employee’s Benefit in Kind taxation liabilities. Where these vehicles are driven predominantly (or even entirely) using their petrol engines, they quickly lose their fuel-efficiency and environmental advantages.
Ensuring drivers select vehicles that are suitable for their journey profiles, along with workplace charging provision where AFVs are offered, are essential elements in retaining overall fleet efficiency in 2019. To learn more about Alternative Fuel Vehicles click here.
Growing interest in cash?
The death of the company car is one of the longest running headlines in the business world. While interest in private leasing has certainly increased, this has not been to the detriment of fleet’s share of car registrations. These have remained at just over 51% of total registrations for 2017 and 2018 (source SMMT).
For those decision-makers considering a switch away from car provision to cash allowances in 2019, a note of caution. While running a fleet of company vehicles can at times seem burdensome, the alternative of managing a burgeoning ‘grey fleet’ can be significantly more problematic. An organisation’s duty of care is not diminished for those driving their own vehicles for business journeys, whereas the organisation’s control over the type, age and condition of the vehicle used is.
For those seeking to reduce the administrative pressure of running a fleet, outsourcing some or all of the required tasks to a professional fleet management partner remains a sound option.
Often cited as the reason behind employee’s interest in cash rather than company cars, Benefit in Kind (BiK) tax rates do continue to rise for the 2019/20 tax year. However, these rates actually decrease significantly for 2020/21 for the most efficient (Ultra Low Emission) vehicles.
For example, a driver choosing a PHEV emitting between 1-50g/km CO2, and capable of between 40 and 69 miles using just its battery, will face a tax liability of just 8% BiK in the 2020/21 tax year. To learn more about company car tax click here.
The Worldwide harmonised Light vehicle Testing Procedure or (WLTP) will continue to shake up the industry. The new emissions testing system has disrupted car choice for the fleet sector and is partly to blame for the year-on-year decline in vehicle sales. Many companies/drivers are putting off renewing vehicles until the confusion is cleared up.
Some cars that were categorised in the lowest emissions band have vanished completely for fleets, thanks to the new testing. The majority of vehicles will also see CO2 ratings around 20% higher when WLTP kicks in. This has led to a rough increase of £40 a month just to drive the same vehicle, while the NEDC correlated period is in place. So far there’s been no large-scale rush for the cash alternative.
Clean Air Zones
The first Clean Air Zone, in this case branded ‘Ultra Low Emission Zone’ (ULEZ), will be in force in central London from 8th April 2019. It will initially operate in the same area as the ongoing congestion charge, but there are firm plans to expand this to most of inner London from 25th October 2021.
Five other UK cities have been mandated to introduce a CAZ, those being Birmingham, Leeds, Derby, Nottingham and Southampton, with many other city councils beginning to draw up plans. Each of these zones is likely to have its own rules and charging structure.
For the 2019 London ULEZ, there are a range of Euro standards that apply for different vehicle types. For vehicles that do not meet the standards in the first three categories, a charge of £12.50 per day will apply in addition to the congestion charge. For the final category the charge rises to £100 per day.
- Euro 3 for motorcycles, mopeds, motorised tricycles and quadricycles (L category)
- Euro 4 for petrol cars, vans, minibuses and other specialist vehicles
- Euro 6 for diesel cars, vans and minibuses and other specialist vehicles
- Euro VI for lorries, buses and coaches and other specialist heavy vehicles
For company fleets the initial impact is likely to be low as most vehicles will meet the required Euro standard. However, care should be taken where older, grey fleet vehicles are being used in the ULEZ or other CAZs. Organisations will need to make policy provision to reflect how these charges will be dealt with; including the possibility of passing the fees on to drivers.
It’s also worth noting that vans (and particularly diesel vans) are significantly more likely to fall outside of the required standard than cars.
To learn more about the plans for Clean Air Zones click here.
Attracting and keeping the best staff
The result of the Government’s review of the impact of WLTP testing on BiK tax liabilities is likely to be revealed in the Chancellor’s Spring Statement in March 2019. It is anticipated that these findings will heavily inform changes to BiK tax rates from 2021/22 onwards.
While this leaves a period of uncertainty for drivers and fleet managers, it is likely that the strategy of incentivising the selection of ULEVs, and of lower CO2 vehicles in general, will continue. This means that decision-makers can ensure that their fleet policy continues to provide attractive employee benefits by offering drivers a wide choice of low emission vehicles.
While traditional company cars (of both the perk and business need variety) provide certain sections of the employee base with a highly valued benefit, many HR and benefit professionals are now seeking to extend the provision of vehicles to a broader base. This trend has been accelerated by the prevailing tough recruitment environment, in which attracting and retaining skilled workers has become increasingly difficult.
Despite the tax changes to Optional Remuneration Arrangements in 2017, salary sacrifice schemes remain a popular choice for extending car benefits to larger groups of workers. Further changes come into force from 6th April 2019 meaning that items such as insurance and maintenance will be included in BiK tax calculations. This is unlikely to make a significant difference to the attractiveness of such schemes, however.
Product innovations in this area, by companies like Maxxia (CLM’s sister company), have also seen increased flexibility in funding options for employees, meaning that an even larger proportion of the workforce can benefit. To find out more visit Maxxia.co.uk
Mobility as a Service (MaaS)
Will 2019 be the year when genuinely integrated mobility solutions begin to make significant inroads into urban travel?
There are pilots in several European cities (including Birmingham) of connected transport solutions and the technology required to power these already exists. However, the infrastructure to deliver truly flexible and integrated transport, even in urban environments, remains far from complete.
This doesn’t mean that decision-makers should sit back and wait for these emerging solutions to arrive. Taking a broader view of the organisation’s mobility requirements, beyond traditional company cars, is something that many are already engaged in.
At its most basic level, this could mean partnering with a fleet provider that’s able to offer flexible solutions for vehicles on different contract lengths, access to cars for those not eligible for a traditional company car and assistance in managing vehicle allocation and logistics. Each of these can significantly enhance overall mobility while making the most efficient use of business resources.
And finally – IFRS 16
Just in case anyone had forgotten, January 1st 2019 sees the International Accounting Standards Board’s new rules around leasing come into force for public limited companies and other firms that report to International Financial Reporting Standards (IFRS).
This means that lessees will need to show their ‘right to use’ a leased item as an asset and their obligation to make lease payments as a liability on their balance sheets. They will also be obliged to reflect depreciation of the asset as well as interest on the lease liability in their profit and loss account.
To find out more about IFRS 16 click here.
*CLM conducted a programme of research with more than 500 drivers into their understanding of, and attitudes towards, AFVs during 2018.