As businesses are now using alternative travel, such as taxi hailing apps and car sharing, the road ahead for the company car looks uncertain.
Company cars could soon be permanently parked. Rebecca Benneyworth told AccountingWEB in 2014 that due to the heavy taxes inflicted on the company car they are fast becoming “not worth it anymore”. Tax Insider recently echoed Benneyworth, writing: “You should consider whether it would be more cost-effective to use your own vehicle for company business.”
Add the maintenance cost, insurance and other additional extras, running a fleet has become less attractive. In the BBC’s exploration into whether we have fallen out of love with the car, they cited the government taking away tax breaks for company cars, the convenience of public transport and a cultural shift away from owning a car as road blocks for ownership.
To add further credence to the idea that the company car is running out of gas, the government has not announced its intentions in regards to the company car taxation until 2019/20. This ordinarily wouldn’t raise an eyebrow, but the government is asking motoring professional bodies for representation for what they would like in the long term.
Alastair Kendrick, tax director at MHA MacIntyre, warned: “We could see from 2020 an absolute sea change in how a company car is taxed. There is no certainty. If you take a car now in the next year on a four year lease it will be with you past 2020.
“The present rules have been with us effectively over ten years now and the government may decide to completely redesign how the benefit in kind is calculated. “
The rise of alternative business travel
Instead, taxi-hailing apps like Uber have risen, offering convenience and the removal of the additional costs, steering people away from owning a car. Head of products at Salesforce Alex Dayon reflected this changing trend of car ownership in a discussion about how on demand and real-time services strengthens customer loyalty. Dayon enthused about a car rental app which delivers any car to you and charges rent per day of use.
Fleet veteran Marcus Puddy sees car sharing as one of the alternative routes fleet will look to continue their growth in 2016. “You get a vehicle for a number of hours. Park it up and then somebody else takes it for another couple of hours. I actually think that’s going to become more and more popular,” said Puddy.
Leasing companies like Alphabet and EuropCar rolled out their subsidiary business-to-business car share businesses in late 2015. Employees will be able to use these cars on company business, but also use them to hire for private use on the evening and the weekends. “What you are seeing now is a number of leasing companies changing their perspective to include that as one of their offerings,” said Kendrick.
Replying to Puddy’s blog Chris Ness, MD of Ubeeqo, the car share subsidiary of Europshare, outlined their growth aspirations: “We will measure our success not by fleet size but by number of clients - innovative technology that facilitates genuine car-pooling and sharing delivering significant cost savings to our clients.”
Ness signs off by saying, “2016 is the year of a step-change in UK business mobility and business travel requirements.”
The next few years are going to be pivotal for the company car. Leasing companies will be trying to get certainty on the direction of BIK. As the younger generation potentially falls out love with car ownership, fleets are going to have to adapt to the market – a cultural shift that could hit the brakes on the humble company car.
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.