The Chancellor's decision not to reveal benefit-in-kind (BIK) tax rates for 2020/21 in his Budget 2016 speech means fleets could be forced to order company cars without knowing how much tax they will have to pay towards them.
Treasury revenue forecasts within the Budget documents indicate that BIK rates could rise by as much as three percentage points. As an industry example, BIK tax on an 109g/km diesel car would rise from 21 per cent in 2016/17 to 31 per cent in 2020/21. The Chancellor's inability to disclose BIK rates five years in advance reverses a recent trend and subsequently fleets and their drivers running company cars into a fifth year will not be able to plan ahead. This confusion has left many within the fleet industry frustrated.
Paul Tate, commodity manager at Siemens, who operates 3,000 cars on a four-year cycle, says the Chancellor's decision will make it 'impossible' for him to give employees the full implications of taking a particular vehicle. 'It's imperative the figure is released as soon as possible, to allow employees to make an informed choice and not put more pain on businesses if there is a sudden sharp increase' said Tate.
This concern was echoed further by Paul Brown, fleet manager, Enserve Group, who said the current BIK tax uncertainty was affecting the running of his fleet. 'You can fix your budgets on contracts and contract terms. You know that you're going to have that fixed cost against your four-year contract' said Brown. 'It's the same for the individual who is taking the car, they don't want to take a car and then find out a year later the goal posts have changed.' However, Budget documents suggest the Chancellor is looking to raise a further £320m for HM Treasury in 2020/21. It also indicates that HMRC is already aware of the 2020/21 BIK rates but has not yet opted to reveal them; especially when the same Treasury documents show previously announced BIK increases, based on a three percentage point increase, will raise an additional £315m in 2019/20. So while fleets could tentatively plan for a further three percentage point rise in 2020/21, frustration still lingers that the Chancellor is yet to provide clarity for the industry.