calder jones gordon

Hundreds of thousands of drivers could opt out of company car schemes if the UK government continues to raise taxes on the benefit, new research has revealed.

A study carried out on behalf of vehicle and asset finance specialist Maxxia Group showed that although 92% of employees view employer-provided car schemes as a positive benefit, 70% would consider opting out and taking a cash alternative if car tax levels continue to rise.

Car schemes have traditionally been a very attractive benefit to employees, but changes in tax treatment introduced by HM Revenue and Customs (HMRC) may have an impact.

Since the recession in 2008, the amount of tax collectively paid each year by company car drivers in the UK, in return for private use of vehicles, has increased by hundreds of millions of pounds. Further rises already planned will raise the tax burden on drivers by nearly £1 billion by 2020.

The government has also moved to protect revenues by changing how it treats tax-efficient salary sacrifice schemes, to focus the benefit on low-CO2 emission cars.

Drivers are willing to opt for cleaner cars, but not if it’s a car they don’t want, particularly as they are being taxed on the benefit.

The Maxxia research showed that 32% took a company vehicle because they got a better car, 23% said it was tax efficient and 22% said it was easier than running their own car.

The majority said they wouldn’t opt for a low-emission car without a tax incentive.

Respondents said the perfect employee car scheme would have to offer a wide choice of vehicles, offer tax-efficient choices, provide cost certainty and be flexible.

When it came to opting out of company car schemes, 32% said they were attracted by the cash option and 28% said they wanted a better choice of car.

Gordon Calder-Jones, director of Maxxia, said: “What was clearly apparent was how finely balanced the decision regarding being part of an employee car scheme and opting out was, following the changes.

“While an overwhelming majority of employees still see the car as an attractive benefit, any further tax increases are likely to tilt the balance dramatically. And it was also very evident that financial rather than environmental considerations were of the most importance for employees in making any kind of choice.”

The study was carried out by independent market research company ID Insight Consulting, on behalf of the Maxxia Group in the UK, which now includes CLM Fleet Management, Anglo Scottish Asset Finance, Capex Finance and Eurodrive Motor Finance.

It is the UK arm of the Australian McMillan Shakespeare Group (MSL) a leading provider of finance, insurance and warranty for new and used cars and one of Australia’s leading vehicle fleet management organisations.