Tax is­sues and the rise of al­ter­na­tively fu­elled ve­hi­cles are mak­ing se­lect­ing a com­pany car in­creas­ingly com­plex

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Choos­ing a com­pany car is be­com­ing ever more com­plex

Choos­ing a com­pany car used to be easy. You cast your eye over the list sent by your fleet man­ager, picked one that you liked the look of or had the best badge to im­press the neigh­bours with, and those were your wheels for the next three years. Then, in­evitably, the taxman caught on. Although com­pany car tax was ini­tially only payable by di­rec­tors and higher-paid em­ploy­ees, it soon be­came based on the size of the car’s engine and then moved to the emis­sions-based sys­tem in 2002.

To­day, choos­ing a com­pany car is any­thing but easy; in­stead, it’s enough to send you reach­ing for the as­pirin. Chang­ing mar­kets and cus­tomer de­mand, Brexit, the VW “diesel­gate” scan­dal, cur­rent and fu­ture emis­sions reg­u­la­tions, tax­a­tion changes, fuel costs – the list of mit­i­gat­ing fac­tors that need to be taken into ac­count by those driv­ers want­ing a com­pany car, their fleet man­agers and even the man­u­fac­tur­ers them­selves, is mind-bog­gling.

“The fleet car mar­ket is suf­fer­ing mas­sively at the mo­ment, sim­ply due to the huge dis­con­nect be­tween what com­pany car driv­ers want and what their fleet man­agers want,” ex­plains com­pany car ex­pert and ed­i­tor of Com­pany Car To­day Paul Barker. “Un­der­stand­ably, many com­pany car driv­ers want to pay the least amount of ben­e­fit-in-kind tax, which is lead­ing them more to­wards petrol cars, es­pe­cially since the April 2018 bud­get [which pe­nalised diesel car driv­ers even more than be­fore].

“How­ever, fleet man­agers want to keep their costs down, so they of­ten want diesel cars for their high­er­mileage driv­ers. As a re­sult, there’s a big dif­fer­ence be­tween the two and no­body re­ally knows how to re­solve it.”

In turn, sales of new diesel cars so far this year are down by more than 30 per cent on 2017. The mar­ket share for petrol cars is now at its high­est for many years, but these pro­duce higher lev­els of car­bon diox­ide (CO2). As a re­sult, emis­sions from the av­er­age new car sold in the UK rose ear­lier this year for the first time since 2000 (source: SMMT New Car CO2 Re­port 2018) – news that was greeted by politi­cians with all the joy of stand­ing bare­foot on a dis­carded gar­den rake.

By com­par­i­son, while sales of al­ter­na­tively fu­elled ve­hi­cles, such as hy­brids and elec­tric cars are ris­ing, they still only rep­re­sent five per cent of the mar­ket. No­body

Sales of al­ter­na­tively fu­elled ve­hi­cles are ris­ing, but they still only rep­re­sent 5 per cent of the mar­ket

ques­tions that elec­tric cars in all their forms rep­re­sent our mo­tor­ing fu­tures; it’s just a ques­tion of how fast we get there.

Jaguar has been one of the first pre­mium man­u­fac­tur­ers to in­tro­duce an all-elec­tric car to show­rooms with its new I-Pace. While pre­mium-badged elec­tric cars have been avail­able with mod­els like the BMW i3 and Tesla’s range, they have been a niche choice for many.

The I-Pace has come ahead of both Porsche’s new al­l­elec­tric Tay­can (based on the firm’s Mis­sion E con­cept) due in 2019 and Audi’s e-tron SUV to be un­veiled later this year, and looks to be able to an­swer many of the tra­di­tional elec­tric-car fears. Two elec­tric mo­tors front and rear with a 90kWh bat­tery give the I-Pace four-wheel drive and a fully charged range of 298 miles.

Stan­dard home wall boxes for charg­ing can, Jaguar claims, give the I-Pace 80 per cent of that range in ten hours (ie, the time be­tween you re­turn­ing from work and leav­ing again in the morn­ing). When more pow­er­ful rapid charg­ers be­come avail­able, that will be con­sid­er­ably faster.

There’s no ques­tion that the ma­jor­ity of Bri­tish com­mutes could be made us­ing bat­tery power, but con­vinc­ing driv­ers of that is an­other mat­ter. There are 16,000-odd charg­ing points in the UK, but the re­al­ity is that they’re not as eas­ily ac­ces­si­ble or well lo­cated as tra­di­tional fill­ing sta­tions.

The ma­jor­ity of those charg­ing points have been pri­vately owned and run too, ren­der­ing them re­dun­dant un­less you’ve got an ac­count with that par­tic­u­lar com­pany (sim­i­lar to only be­ing able to use your own bank’s ATM ma­chines up un­til the late 1980s). Thank­fully eas­ier “plug-in-and-pay” type points are now be­com­ing more widely avail­able.

There’s an­other irony in store for any­one choos­ing a fully elec­tric com­pany car, too. The gov­ern­ment is ob­vi­ously keen for driv­ers to adopt this new, cleaner tech­nol­ogy, and fully elec­tric ve­hi­cles will at­tract a very tempt­ing ben­e­fit-in-kind tax rate of just 2 per cent for the fi­nan­cial year 2020-21. Un­til then though, for the cur­rent year it stands at 13 per cent and then ac­tu­ally rises, rather oddly, for 2019-20, to 16 per cent.

“For those run­ning a fleet of cars, the main cri­te­ria is cost of own­er­ship in­clud­ing run­ning costs over those first three years,” ex­plains Toby Pos­ton, the main spokesper­son from the Bri­tish Ve­hi­cle Rental and Leas­ing As­so­ci­a­tion. “But com­pa­nies also want to be seen to be do­ing the right thing, which is why diesel re­mains the best choice for those do­ing 30-40,000 miles a year.

“How­ever, with the av­er­age busi­ness fleet jour­ney be­ing around 150-170 miles, once the range of elec­tric cars starts

to get closer to that, then they be­come a more plau­si­ble op­tion for com­pany car driv­ers. Many fleet man­agers, how­ever, are start­ing to in­sist that those choos­ing an elec­tric ve­hi­cle of what­ever de­scrip­tion have a charg­ing point in­stalled at home.”

Un­til now that’s been a thorny sub­ject for those run­ning plug-in hy­brid mod­els. On pa­per, plug-in hy­brids boast in­cred­i­bly high av­er­age fuel economies (thanks in part to the way that the cars are tested) and there­fore boast tax rates lower than an earth­worm’s shirt but­tons.

In re­al­ity though, with a petrol engine along­side their elec­tric mo­tors, there has been no in­cen­tive for the driv­ers of plug-in hy­brids to reg­u­larly recharge, mean­ing far higher than ex­pected fuel bills for the com­pany in ques­tion. For fleet man­agers, find­ing that fine bal­ance be­tween low run­ning costs and low tax­a­tion rates, while also keep­ing em­ploy­ees happy, is only go­ing to get harder. Com­pany cars are viewed by em­ploy­ees as one of the big­gest job perks, along­side pensions – and are of­ten rated higher than pri­vate health­care.

The in­creas­ing num­bers of elec­tric and hy­brid mod­els muddy the wa­ters of the tra­di­tional choices still fur­ther. Choos­ing a com­pany car is, un­for­tu­nately, about to get harder than ever.

Jaguar’s I-Pace is ush­er­ing in a new era for pre­mium elec­tric cars

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