Danger – Diesel

Article published in Fleet World

Strolling through a leafy London suburb, I happened to notice a parked car onto which someone had written the words “Diesel Danger”. As I had been planning to write about diesels this month this was too good an opportunity to miss, so I whipped out my camera and started taking photographs.

I then noticed Bill Oddie standing next to me (yes, really, and if you are under 30 I’m sorry if you don’t know who I’m talking about). He was wearing a facial expression that said “Who the heck are you and why are you taking photographs of my car?” I introduced myself and explained that I was taking the photos to accompany this article. He said “Will you be able to do anything about the scourge of diesels?” and I said probably not, but I would try. He then smiled and invited me to look at the other side of the car, on which he had written “They said it was safe….”.

He’s right of course, they did tell us diesels were safe. When the tax system was altered to take account of engine emissions, companies changed their car schemes to favour diesels because this was the environmentally-friendly option that saved NI for the employer and income tax and NI for the employee.

The problem was, whilst reducing CO2 would save the planet, an increase in the number of diesel cars would boost the quantity of oxides of nitrogen (NOx) being pumped into the atmosphere, and NOx is a pollutant that kills.

We now have a perfect storm brewing. Diesel is a dirty word, the fuel has no friends in the corridors of power, the Transport Minister has already warned people off buying diesel cars and from 23 October Sadiq Kahn, the Mayor of London, will introduce a £10 toxicity charge for cars, vans, minibuses, buses, coaches and HGVs not meeting Euro 4 standards.

DEFRA lost a High Court case in May as a result of which it was required to publish its draft plans for addressing the problem of nitrogen dioxide.  We learned from this that the government likes the idea of local authorities introducing clean air zones (but isn’t too keen on motorists being charged to drive into them), expects Birmingham, Derby, Leeds, Nottingham and Southampton to introduce clean air zones by 2019 and wants dozens more towns and cities to follow suit soon after. The much-discussed diesel scrappage scheme is still being considered, though if introduced it would clearly have to be focussed on removing the most polluting vehicles only otherwise the cost would be astronomical (£60bn were every diesel car and van to be scrapped).

For fleet managers, the key line in the report was buried in clause 54 “The Government will continue to explore the appropriate tax treatment for diesel vehicles and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017”.

Whilst civil servants are not allowed to speak publicly on matters affecting policy in the run up to the election, the mood music coming out of the corridors of power is not that encouraging for fleet managers. The government urgently wants to reduce the number of diesel cars on the road. As someone told me “They are looking at everything: benefit in kind tax, vehicle excise duty, writing down allowances, AMAP rates, national insurance, everything”.

Whilst sales of diesel vehicles are down 6.4% year on year, there were still more than 400,000 diesel cars sold in the year to end April 2017 and the government thinks this number is too high.

As it happens the blanket “diesel is bad” analysis is a bit unfair on car manufacturers, who have reduced NOx and other emissions in line with the latest Euro 6 standard, which makes new vehicles cleaner than ever before.

Source SMMT

Emissions standard Applied to new passenger car approvals from Applied to all new registrations from
Euro 1 1 July 1992 31 December 1992
Euro 2 1 January 1996 1 January 1997
Euro 3 1 January 2000 1 January 2001
Euro 4 1 January 2005 1 January 2006
Euro 5 1 September 2009 1 January 2011
Euro 6 1 September 2014 1 September 2015

Euro 6 was implemented for new vehicle approvals on 1 September 2014, and all new registrations had to comply with Euro 6 standards from 1 September 2015. So a significant proportion of existing fleet cars now emit very low levels of NOx indeed, as these charts show.


Emissions standards CO: HC: NOx: PM: PM:
Euro 3 2.3g/km 0.20g/km 0.15g/km
Euro 4 1.0g/km 0.10g/km 0.08g/km
Euro 5 1.0g/km 0.10g/km 0.06g/km 0.005g/km (direct injection only)
Euro 6 1.0g/km 0.10g/km


0.06g/km 0.005g/km (direct injection only)


6.0×10 ^11/km (direct injection only)




Emissions standards CO: HC + NOx: NOx: PM: PM:
Euro 3 0.64g/km 0.56g/km 0.50g/km 0.05g/km
Euro 4 0.50g/km 0.30g/km 0.25g/km


Euro 5 0.50g/km 0.23g/km 0.18g/km 0.005g/km 6.0×10 ^11/km
Euro 6 0.50g/km








6.0×10 ^11/km



However, you can be sure that as more members of public hear the message “diesel is bad” they will be less inclined to buy used diesel cars. This can only reduce residual values and lead to an increase in lease rentals (or depreciation for fleets that buy their cars or fund them via hire purchase).

Which takes us to the key question for fleet managers: given that the government is so keen to discourage the use of diesel cars, how can fleet managers protect their companies (and employees) against rising costs? The obvious answer is to start looking seriously at the alternatives.

Whatever changes the government introduces we can be sure they will still be committed to reducing CO2. The need to reduce global warming isn’t going to go away, so the safe bet is to look for low-CO2 alternatives to diesel-engined vehicles.

And there are a lot to choose from these days.

For example, smaller, petrol-engined cars. Many manufacturers have done a great job in making smaller power units that are lighter but more powerful. Some of these cars deliver very good performance with low CO2 and NOx output.

If you haven’t yet added hybrid vehicles to your fleet, now is the time to consider these. Low emissions, high mpg, proven technology and pretty high residuals (which deliver low rentals). What’s not to like?

You don’t have any plug-in electric cars on your fleet? Range anxiety can be an issue with battery-powered vehicles, but if you analyse the journeys your employees are driving you may well find employees for whom an electric car would work most of the time, except for the occasional journey that could be handled in a rental car or pool car. Most of these cars are still expensive to buy, even with the government grant, but the cost of the fuel is tiny compared with filling up at the pump.

This sort of analysis is valuable at any time but could be particularly valuable now that we know the government has diesel in its cross-hairs. Looking at your attitude to diesel now could make a lot of sense.

Professor Colin Tourick

Challenging the scaremongers

Article published in Fleet Leasing

Earlier this year the Bank of England initiated a review of the provision of motor finance to UK consumers, instructing the Prudential Regulatory Authority (PRA) to check how resilient lenders’ balance sheets would be in the event of a market downturn and instructing the Financial Conduct Authority (FCA) to look at whether industry practices were harming to consumers.

Very little additional information has entered the public domain since then. The FCA’s ‘Business Plan’ said only that they are “concerned that there may be a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance industry“, and that it “will conduct an exploratory piece of work to identify who uses these products and assess the sales processes, whether the products cause harm and the due diligence that firms undertake before providing motor finance“.

Some of the newspaper headlines at the time caused a chill wind blow through the boardrooms of fleet leasing and motor finance companies and through the corridors of the BVRLA and FLA. These articles questioned whether the motor finance market was “heading for a crash” or rife with “loan mis-selling”; suggested that that car salespeople “earn thousands of pounds” every time a customer signs an agreement and even wondered whether “mis-sold car finance could be the next PPI scandal”.


On first reading these articles related solely to PCP sold through motor dealers. However, as the initial announcements referred to the sale of motor finance products to consumers, we may assume that this exercise will include the sale of PCH and PCP by fleet leasing companies. FN50 companies are big players in consumer finance, having written 156,000 new PCP and PCH deals last year.


Frankly, some of those press articles were appalling: poorly researched and lacking balance.


The fact is that most of the industry’s customers are very happy with their PCP or PCH agreements. The industry has invested heavily since the FCA arrived: rewriting procedures, recruiting and training staff and reprogramming systems to ensure that customers not only get the products they need and want, but make fully-informed decisions and are treated fairly.

The PRA is responsible for promoting the safety and soundness of financial services companies whilst the FCA is responsible for ensuring that customers are protected.

The PRA’s review will look at what would happen should interest rates rise and GDP fall. Would defaults increase, what would happen to residual values and what effect would this have on lenders?

The FCA will look at whether there is adequate transparency in the market (whether products and firms’ roles are understood by the consumer), whether lending is responsible (i.e. if consumers can afford the financial product and it is suitable for them) and whether there are conflicts of interests (arising, for example, from salespeople earning commission).

The review of the sector was triggered by the Bank of England’s concern that household indebtedness is high and rising relative to incomes, which might potentially cause problems for lenders with lax lending standards.

Household debt was at an all-time high of around 150% of household income just before the financial crash, then fell to around 130%, and it has now risen to around 133%. Of this, three quarters relates to mortgage borrowing.

Dealership car finance has grown by roughly 4.5% pa over the last few years, which suggests that it is rising rapidly. However, there is an issue with these statistics.

Historically, when people wanted to fund their next car purchase they may well have gone into their bank and taken out a car loan. This option is less popular now (in no small measure because of the guaranteed minimum future values and very low interest rates offered by manufacturer captive finance companies). So whilst the stats show that dealer finance is rising this does not accurately reflect the totality of motor finance. It is conceivable that total motor finance has remained static whilst the mix of deals within the total has changed, with more dealer finance and less bank finance.

Similarly, these statistics exclude PCH. A consumer who in the past only bought used cars might well have taken out their first PCH agreement in the last few years, attracted by the low monthly costs compared with repaying capital and interest on a bank loan. It is possible to argue that this change in behaviour is very much to the consumer’s benefit but in the stats it simply looks like one more new car has been sold via a consumer funding agreement.

It is reasonable to assume that the FCA, having dealt with major concerns about payday lenders, are now focussing on the motor finance market primarily because of the size of the market rather than because it is concerned of any specific bad practices it wishes to squeeze out.

The BVRLA and FLA are both actively working to help the regulators understand how the market works and putting forward the industry’s case.

If your company is not active within BVRLA or FLA committees, and you have insights or ideas about how the market might be improved that might be worthwhile presenting to the regulators, now might be an excellent time to discuss these with the trade bodies. It will be far better to present ideas to the regulators now rather than simply waiting for them to bring forward new draft regulations.

These are some of the point that are no doubt being made by the trade bodies to the regulators:

  1. If the FCA is concerned about competition, it should be aware that, as far as industry practitioners are concerned, competition has never been fiercer.
  2. If they are concerned about price transparency, perhaps more could be done to better educate consumers about the products they are buying. Lenders already do a lot to help consumers make informed choices. Perhaps the next big step would be to move forward with interactive video. This is a nascent technology in which the viewer watches a video clip and must then click to answer a question correctly to confirm their understanding of the issue, before moving to the next step of the video. An audit trail is retained as evidence of compliance.
  3. The systems used by UK lenders to determine creditworthiness and affordability are the envy of lenders in other countries.
  4. Levels of arrears and repossessions are historically low.
  5. Customers have been attracted to low interest or free insurance/low deposit deals, but this is a good sign of a healthy market rather than a sign that something is working against the customer’s interests
  6. PCP offers customers the right of withdrawal, protection against merchantable quality issues and options at the end of the contract that deliver huge, often unsung benefits for the customer. PCH offers RV protection and a very simple product proposition (effectively, a simple form of long term rental).
  7. The ombudsman, BVRLA, FLA and FCA get few complaints from the industry’s customers.
  8. Other than in scare-mongering newspaper headlines, is there any evidence of a growth in irresponsible lending? However, if the regulators’ reports fail to give the industry a clean bill of health this could encourage ambulance-chasing operators to turn their attention from PPI claims (which are now coming to an end) to our industry. “Have you entered a PCP or PCH agreement in the last six years? You might be entitled to claim! Apply now!” A nightmare scenario. If encouraged to believe they had the right to make some sort of claim, many customers would stop making their monthly payments – which could indeed cause problems to lenders’ balance sheets.
  9. The industry is proud of what it does. PCP and PCH are great products for the consumer: good for competition, the economy, the environment, manufacturing and the customer.
  10. The growth in motor finance has come about because people have felt more confident about acquiring a new car in recent years because the macroeconomic environment has been benign: low interest rates, high levels of employment, low risk of redundancy/unemployment, a strong economy, high residual values. It is therefore unsurprising that people have felt more confident about entering into these deals.

If you have any thoughts on these points or have insights, ideas or data that could help the BVRLA or FLA in their discussions with the regulators, now might be a good time to provide these to them.

Professor Colin Tourick



The Finance Bill – the aftershocks

Article published in Fleet World

Last month’s article was entitled The Finance Bill –  a seismic shift for fleet managers and included an explanation of the new Optional Remuneration (OpRA) rules.

That article generated more reader response than we have had in nearly a decade of writing these articles, the general tenor of which can be summed up as “the Government is planning to do wha-aaaaat? Really?”

Given the importance of the Finance Bill we need to return to this topic this month. The changes will affect many fleet managers, quite possibly the majority.

We will look at the proposals again but from a slightly different angle; trying to work out why the government have introduced these changes and thinking about what you as a fleet manager need to be doing now to ensure that your company and your employees don’t end up being disadvantaged.

First let’s reprise what’s actually being proposed.

The draft legislation describes two types of OpRA; Type A and Type B.

Under a Type A arrangement the employee foregoes earnings in return for the benefit. This is the familiar scenario of a typical salary sacrifice arrangement. If an employee sacrificed salary and was given a company car emitting more than 75g CO2/km before 6 April 2017, they will continue to be taxed under the old rules (the normal company car BIK rules) until the earlier of 6 April 2021 or the date they modify or renew the deal. The new rules do not affect cars that emit less than 75g CO2/km – these arrangements continue as before.

Under a Type B arrangement, the employee receives a benefit (such as a company car) rather than some earnings. This is the one that is making people stop and think. You might think that if someone received a company car, the fact that they had been entitled to a cash allowance would become irrelevant and that they should be taxed under the benefit in kind rules for company cars. That’s what happened in the past and it made perfect sense.

However, that’s not what the draft legislation says. It says that if an employee who is entitled to either a cash allowance or a company car opts for the company car, they will be taxed on whichever generates the most tax.

In a few moments we will try (and largely fail) to explain the government’s logic but first we need to mention that the legislation contains safeguards against clever people trying to game the system.

If any OpRA is changed or renewed after 5 April 2017 the new rules will apply from the date of the renewal or change, except where this has been made necessary by a reason outside of the control of the employer or employee. For example, where the car has been written off and has to be replaced. In such circumstances the change will not be regarded as an event that triggers a move to the new rules.

So, to summarise, we now have two different arrangements:


Type A B
Applies when… …employee foregoes earnings and takes a benefit instead …employee is entitled to a cash allowance but opts to take a benefit instead (e.g. a company car)
Example Car salary sacrifice:

If the car emits more than 75 grams CO2/km the employee will be taxed on the higher of:

·        the cash equivalent value of the company car (broadly; list price x the emissions-based CO2 percentage) or

·        the amount of salary they sacrificed.


Free fuel salary sacrifice:

Employee agrees to forego some salary and the employer agrees to pay for free private fuel. The employee will be taxed on the greater of:

  • the cash equivalent value of the fuel (fuel multiplier of £22,600 x the car’s emissions-based CO2 percentage) or
  • the amount of salary sacrificed.


If the car emits more than 75 grams CO2/km they will be taxed on the greater of:

·        the cash equivalent value of the of the company car or

·        the cash allowance foregone


If you want to try to work out why the government has taken this approach to Type B arrangements, it helps to remember that the benefit in kind tax rules were designed to standardise the taxable value when an employee is allowed free private use of their company car. However, in reality they do nothing of the sort. If you and I drive identical company cars and pay income tax at the same marginal rate, but I drive 20,000 personal miles and you drive just 2,000, it stands to reason that I get more personal benefit from the company car than you do. But we still pay the same benefit in kind tax, which is clearly unfair. However, the system isn’t designed to be fair, it’s designed to be simple to administer and to generate a certain amount of money for the government.

Working out the real benefit an individual derives would be an administrative nightmare involving a personal evaluation of the benefit for each employee. However, one might argue that where the employee has the choice between two alternatives they will automatically take the one that is worth the most to them. Therefore, (according to the sort of logic HMRC adopts) if the employee takes the car but the cash allowance is worth more, the employee must value the car at least as much as the value of the cash allowance.

So if I choose a company car that generates a taxable benefit of £200 per month rather than a cash allowance of £300 per month, HMRC will say that I’m placing a value on the car of at least £300 per month and they will tax me on the £300 per month. Ouch.

We can safely assume that these new rules aren’t going to go away, whoever wins the general election. So we have to learn to live with them.

With Type A contracts the situation is clear. If you operate a salary sacrifice scheme you will need to evaluate the net cost of the new rules to the company and to the employees. We have a transition period but this only applies to existing contracts: where there is a new contract the new rules have to be applied. If an employee wants to sacrifice salary for a company car they need to know how much it will cost them. Talk this through with your supplier; they will be able to do the sums for you.

With Type 2 contracts the situation requires more thought. Many company car schemes give the driver the option to take a cash allowance, though in practice most employees chose the company car. But in future the mere existence of the cash allowance option risks creating a tax liability that could be far greater than the benefit in kind tax that the employee would have paid in the past.

Cash allowances have been an important part of flexible benefits schemes for decades. If you offer them, now might be a good time to review whether you should continue, and, if so, the amounts that should be on offer. It could well be that you find that for a whole group of drivers, particularly those who are only allowed to choose from a small range of cars, it might be worthwhile withdrawing the cash option completely.

If you have a group of drivers (say all employees at a certain managerial grade) who are entitled to either a company car (lease rental max say £400 per month) or a cash allowance of say £420 per month, you will find things become complicated. The BIK tax on those cars will vary according to list price and CO2 emissions whereas tax on the cash allowance will be static – and needs to be known by the employee before they order the car, because that’s the amount that will be payable if it’s higher than the BIK.

Most employees are likely to feel mightily aggrieved if they have to pay tax on a cash allowance they have not received, rather than BIK tax on the company car they have received.

Here again a conversation with your leasing company or fleet management supplier will be the order of the day. This stuff is not straightforward.

The aftershocks of the Finance Bill will be felt for some time to come.

Professor Colin Tourick

ExpertEye Fleet Industry Review


21st April 2017

UK Fleet Operators anticipate greater demand for petrol vehicles

 The latest ExpertEye Fleet Industry Review highlights a move towards petrol vehicles for UK fleet operators together with a growing demand for alternative fuels.

Produced in association with Professor Colin Tourick from University of Buckingham, ExpertEye’s latest review provides valuable insights into the latest status and views of the UK fleet marketplace.  Despite Brexit now a certainty, coupled with the recent election announcement and news of changes to company car taxation in the Spring Budget, the UK economy is not showing signs of drastic change.

Based on a survey of over 200 fleet operators the findings include:-

  • More companies are putting petrol-engined cars back onto their fleet lists, or drivers themselves have decided to opt for petrol.
  • Respondents expect to see a reduction in diesel in the next two years, with electric, electric range-extended and hybrid engines gaining in popularity. A significant number of them believe that petrol will be making a comeback.
  • Almost no respondents (the UK’s fleet operators) expected the economy to shift drastically either up or down but they are slightly less optimistic than before.
  • More than half of respondents expected no change in demand for cars and more than three quarters expected no change in demand for LCVs. Of the few who expected demand to decrease, 20% said there would be decreased demand for cars (the highest level since H2 2013) and 7% said there would be decreased demand for vans.
  • Contract hire remains the predominant form of finance used by businesses, though there has been a steady growth in respondents using finance lease and Professor Tourick suggests reasons for this in the Review.
  • Reliability, fleet running costs and fleet safety and risk management remain top of respondents’ concerns as they ponder fleet management decisions they will be making in the next 12 months.

The ExpertEye Fleet Industry Review is based on a biannual survey of fleet operators which measures their practices and references attitudes and opinions on a wide range of issues:

  • fleet profiles and policies
  • the current economic and fleet environment
  • factors influencing supplier and vehicle choice and
  • Predictions about vehicle requirements and influences.

With trends going back 7 years this report contains a unique insight into the key factors driving fleet acquisition decisions including commentary and analysis from a leading industry expert.  The Review contains a summary of the survey and analysis of the results provided by Professor Colin Tourick at the University of Buckingham, on behalf of ExpertEye ag.

About ExpertEye

ExpertEye offers extensive insight into the automotive market across Europe.  Utilising research and key data from leasing providers, vehicle manufacturers, dealers, fleet operators and the drivers themselves, we provide the complete range of business feedback about all aspects of the leasing, buying, maintenance and renewal processes.

For more information please contact info@experteye.com

The Finance Bill – a seismic shift for fleet managers

Article published in Fleet World

Normally, when the government publishes the draft wording of a Finance Bill, the fleet press and commentators rush to give their thoughts, but that didn’t happen on 20 March when the government published Finance (No. 2) Bill 2016-17, the legislation that enacts the chancellor’s spring budget. They had good reason to hesitate, because the government’s proposals are complex and far-reaching and it seems that everyone has needed to take a little longer to work out what it all means. The key areas fleet managers need to be aware of are that the draft puts flesh on the bones of the new approach to salary sacrifice that was announced in the Autumn Statement and introduces a very different approach to cash allowances.

At least one major accounting firm has suggested that the new rules will also affect Employee Car Ownership Schemes (ECOS) but at the time of writing this is unclear, as is the position when an employee who has the right to a cash allowance instead of a company car selects a company car below their entitlement level, i.e. they ‘trade down’. Trading up was referred to in the draft legislation but not trading down.

This article ignores these uncertainties and concentrates on the things we definitely know.

As the government had already announced, from 6 April 2017 any tax and national insurance contributions (NICs) advantages under salary sacrifice arrangements will be withdrawn.

Just to recap, under a salary sacrifice arrangement an employee gives up the right to some salary and receives a benefit instead.

When salary sacrifice is used for cars, the employee saves tax and employees’ NIC, and the employer saves employers’ NIC. The employee pays benefit in kind tax under the normal rules for company cars. Historically, if an employee chose a relatively low cost, low-CO2 car they could make savings. Salary sacrifice schemes have predominantly been used to provide cars for employees who would not otherwise be entitled to a company car, most of whom have been basic rate taxpayers.

The draft legislation describes these arrangements as ‘optional remuneration arrangements’ (OpRAs). The industry knew that salary sacrifice schemes were being reviewed in 2016, but before last November they had no idea that the government would include cash allowances in the rule changes. This has been confirmed in the wording of the draft bill.

If your company operates a salary sacrifice arrangement or offers benefits such as company cars or the option to take a cash allowance in lieu of those benefits, you need to understand the new rules. Even employers that have never offered salary sacrifice but offer employees the choice between a cash allowance and a company car are caught by the new rules. An awful lot of companies, tens of thousands and maybe more, now have to consider how these changes affect them.

The draft legislation describes two types of OpRA, both of which will now be regarded as conferring a benefit on the employee.

  • Under Type A arrangements the employee foregoes earnings in return for the benefit (e.g. a salary sacrifice car)
  • Under Type B the employee receives a benefit rather than some earnings (e.g. takes a company car rather than a cash allowance).

And here is the key piece of information: if an employee choses to take a benefit instead of an amount of salary, they will be taxed on the greater of the salary given up and the taxable value of the benefit in kind.

The legislation includes provisions designed to stop people claiming that a particular type of benefit or form of salary reduction falls outside the scope of the rules.


There are transitional arrangements. If someone took a car emitting more than 75g CO2/km on a salary sacrifice scheme before 6 April 2017 they will be taxed under the old rules (the normal company car BIK rules) until the earlier of 6 April 2021 or the date when they modify or renew the deal. If the car emits less than 75g CO2/km the old rules continue to apply.

If an employee changes or renews the OpRA on after 6 April 2017 the new rules will apply from the date of the renewal or change. Amendments that arise because of matters that are not within the control of the employer or employee – e.g. the car is written off and replaced, or the employee is allowed to vary the arrangement because they take are on extended sick or leave or maternity leave – are not regarded as changes for this purpose.

Is a car emits more than 75 grams CO2/km and the employee has sacrificed salary, they will be taxed either on the normal basis for a company car (which is broadly; list price multiplied by a percentage based on the CO2 emissions of the car) or on the amount of salary they sacrificed, whichever value is the higher. To determine whether the benefit in kind or the salary sacrifice delivers the higher value, any capital contribution made by the employee towards the purchase of the car or payments for private use are ignored in the initial calculation (called the “modified cash equivalent”).

Once the appropriate amount has been calculated the employee gets credit for any capital contribution (capital contribution [max £5,000] x the appropriate percentage). Credit is then given for any private use contribution.

Fortunately, HMRC has provided an example of how this will work in practice. Assume an employee has a car for the whole of 2017-18, for which they sacrificed £300 salary per month, and they also paid £1,500 to get a higher spec car than their limit allowed. The car’s list price is £20,000 and it has an appropriate percentage of 17%. The normal cash equivalent value of the vehicle would be:

  • £20,000 less capital contribution £1,500 = £18,500 x 17% = £3,145

The modified cash equivalent is:

  • £20,000 x 17% = £3,400 (the capital contribution is ignored).

The sacrificed salary exceeds the modified cash equivalent, so the sacrificed salary will be used to calculate the additional amount to be treated as earnings and taxed.

Therefore the taxable amount is £3,600 less £255 (capital contribution of £1,500x 17%) = £3,345.

This approach also extends to free fuel supplied to an employee who gives up salary for the right to receive free private fuel paid for by their employer. They will be taxed on either the cash equivalent value of the fuel (calculated on the normal basis where the fuel multiplier of £22,600 is multiplied by the appropriate percentage based on the car’s CO2) or the amount of salary sacrificed by the employee for the benefit of the fuel, whichever is the greater.

So if an employee sacrifices £400 per month and their employer pays for private fuel for a company car with an appropriate percentage of 20%, the cash equivalent of the fuel benefit will be £4,520, the sacrificed salary will be £4,800, and as the sacrificed salary exceeds the cash equivalent value of the fuel, the employee will be taxed on £4,800 not £4,520.

A similar calculation needs to be made if salary is sacrificed in return for being given a company van or free private fuel for such a van.

It’s going to take some while for fleet managers and the fleet industry to get their minds around this sort of logic and there are a lot of consequences of these new regulations.

  • When choosing their company cars, employees need to know how much tax they are going to pay. Currently this is normally shown on the leasing company’s quotation screen. In future, these screens will have to be modified to provide the correct figures, and the systems will have to hold information about cash allowances, capital contributions, personal contributions, etc.
  • Employers are going to have to decide whether to keep cash allowances at current levels or reduce them. If the company offers a generous cash allowance scheme many employees will find that they are being taxed on a cash allowance they haven’t received.
  • The new rules may reduce the incentive for employees to choose low CO2 cars. Employers have to decide how they wish to manage this, or indeed whether this is important to them.
  • Salary sacrifice schemes still work, but the interplay between salary sacrifice, cash allowances and ‘normal’ company-car based benefits in kind tax mean that leasing companies are going to ensure that their quoting system provide the employee with all necessary information on which to base a decision about whether to enter into the salary sacrifice arrangement.

Professor Colin Tourick

Salary Sacrifice for Cars: banishing the myths

Article published in Fleet World

This is the third time in the last twelve months that we have looked at salary sacrifice in this column, and I make no apologies for returning to it now. There are so many myths about the impact of the Chancellor’s announcement in November that it’s definitely worthwhile taking a deeper look.

Just to recap, in a nutshell, the changes the Chancellor announced were as follows:

If an employee takes a car emitting more than 75g/km of CO2 they will pay the higher of (1) the relevant level of Benefit In Kind (BIK) tax for that car or (2) tax on the amount of salary sacrificed.  The changes commence on 6 April 2017 for new agreements and 6 April 2021 for agreements that were live on 6 April 2017.  Cars with 75g/km or less (ULEVS – Ultra Low Emission Vehicles) are not affected by the changes.

So, let’s knock on the head some of the myths that have been flying about.

  1. “Car salary sacrifice schemes have been banned.”

That’s not correct. The tax treatment has changed for some cars but employers can still offer salary sacrifice for cars.

Imagine a situation where you are about to start a new job and the HR person goes through a nice long list of all of the benefits of employment. “We also offer a simple scheme whereby you or a member of your family can drive a brand new fully-insured car using the discounts we have negotiated with our suppliers and the interest rate we pay when borrowing money. In other words, you get the benefit of our buying power.”

Wouldn’t that sound attractive to you? Well that’s still the position. Yes, some tax benefits will only be available for cars emitting more than 75g/km of CO2 from 6 April, but this doesn’t stop the employee getting the benefit of their employer’s buying power, whilst still enjoying other savings like employee National Insurance.

  1. “Salary sacrifice schemes will end in 2021.”

That’s not correct either. Cars that are ordered under salary sacrifice arrangements before 6 April this year will benefit from the old tax rules even if they are delivered afterwards. The 2021 date refers to how long the existing tax treatment of current contracts, and new contracts signed before 6 April, will be protected for.

  1. “Salary sacrifice is going to become more expensive for everyone.”

Also, incorrect, and not just because the rules remain unchanged for ULEVs.

Salary sacrifice cars were always regarded as regular company cars for tax purposes. BIK tax rises annually and will continue to do so for all company car drivers. If the BIK tax an employee is paying on their car already exceeds the income tax on the salary being sacrificed, they will be unaffected by the new rules.

This point, which is explained in more detail in the Range Rover Evoque example below, has not received enough publicity. One leasing company carried out an evaluation of the effect of the new rules on their salary sacrifice clients. They started by assuming that every salary sacrifice employee currently driving one of their cars would have stared their contracts after 5 April. According to their evaluation, 46% of those drivers would be paying no more tax under the new rules than they are paying now in BIK tax. If they did have to pay extra tax, in most cases this would be less than £5 per month. Of course, the employees could avoid this extra cost by simply choosing lower-CO2 or cheaper cars.

  1. “The changes do away with tax and national insurance benefits.”

We’ve already dealt with the tax benefits. Employers will no longer make Class 1A NI contribution savings on vehicles with emissions above 75g/km of CO2. But there has been little publicity about the fact that the Chancellor’s announcement does not affect employee national insurance at all, so there are still NI savings to be made. 75% of current salary sacrifice drivers in the UK are basic rate tax payers so this represents a 12% saving on top of the other discounts.

  1. “Many companies are withdrawing from salary sacrifice schemes.”

In fact the opposite appears to be the case. The day after the Chancellor’s autumn statement a couple of large companies announced that they were withdrawing their salary sacrifice schemes. However, leasing companies have said publicly that they have launched many new schemes since November. It seems that a backlog had built up whilst employers waited to hear what was said in the Autumn Statement. And many employers have realised that their employees value these schemes even without the tax benefits.

  1. “Salary sacrifice is now only worthwhile for ULEVs.”

As already shown above, this is not correct. However, the savings will be good for ULEVs under the new rules.

Let’s now look at a couple of interesting examples. In the first example, we can see that there is still a saving to be made by the employer even though the CO2 of this vehicle significantly exceeds 75g/km.



Mini Cooper

The employer’s position
Current Post April 2017
Vehicle & CO2 92 g/km 92 g/km
P11D value £18,060 £18,060
Vehicle scale charge 20% (ave) 20% (ave)
Gross salary reduction £366.53 £366.53
Benefit in Kind £301.00 £301.00
Class 1 NI that would be paid on salary £50.58 £50.58
Class 1A NI payable on gross reduction or taxable benefit,  whichever is higher £41.54 £50.58
Net saving per employee £9.04 £0.00
Average annual net saving £108.48 £0.00
Average pension saving per employee (if employer reduces gross pay for pension purposes) £51.31 £51.31
Monthly net saving £60.35 £51.31
Annual net saving £724.20 £615.72

ULEV vehicle example Current

And in this high-CO2 and high P11D value example the driver will see no increase, as they are already paying more in gross BIK than the gross salary being sacrificed.


 Range Rover Evoque – 40% tax payer


The employee’s position
Current After 6th April 2017
Value of the car (P11d) £36,562.00 £36,562.00
CO2 emissions & Average HMRC BIK Rate 113g | 22% 113g | 22%
Gross BIK £670.30 £670.30
Gross salary sacrifice per month £ 567.14 £567.14
Monthly BIK (P11d value x CO2% x marginal tax rate, divided by 12) £ 268.12 £268.12
Income Tax saving (gross sacrifice x tax rate) £ 226.86 £226.86
NI saving per month (this saving will remain) £    11.34 £11.34
Tax due (BIK or income tax whichever is higher) £ 268.12 £268.12
Net cost to employee £ 597.06 £597.06
(Gross cost – NI saving – Income Tax saving + Tax due)

I suspect that once they do the sums, most employers will decide to stick with their salary sacrifice schemes. The calculations now have to be done slightly differently but the financial logic in favour of salary sacrifice for cars remains intact.

Professor Colin Tourick

Where next for the fleet leasing industry?

Article published in Fleet Leasing

When I downloaded an app that allowed me to check nitrogen oxide levels close to my home, I was disappointed that the readings were two weeks old. Then I became interested in my disappointment. Much of the research data I look at is months old, yet here I was expressing disappointment with readings that were just two weeks old.

How our expectations have changed. We expect everything instantaneously and are disappointed if we can’t get it. Let’s bear this in mind as we start discussing the future of the fleet leasing industry.

In the long term, say 10-15 years, fully autonomous vehicles will be ubiquitous. People who prefer to drive may be viewed as “hobbyists”, much as we now regard those who take photographs on film then develop and print the results. Most of us live in cities and won’t want to own cars because we will be able to summon up an autonomous vehicle at will, just like we book an Uber today.

Whether they will actually be operated by Uber or a similar company is open to debate. The speed of Uber’s rollout (and their losses) have been spectacular, and they are working on autonomous cars, but once a new autonomous car rolls off the production line it will be able to find passengers for itself. In this scenario, what value does an Uber-like company add?

Someone will need to buy the cars, charge for journeys, manage maintenance and so on, and fleet leasing companies would be well-placed to do so, though this role could also be performed by wholesale funders or indeed the manufacturers – they have most of the infrastructure already and just need cash on day 1 to replenish their working capital. However, once vehicles are able to report their own faults, book themselves in for repair and drive themselves to auction for sale, there may not be much ‘management’ left to do.

Totally autonomous vehicles may not need to go to auction. They could drive themselves to potential buyers, who will probably be in rural areas where operators cannot viably offer ride-on-demand services.

The fleet leasing industry is in good health at present. Huge demand from its traditional customers – medium and large fleets – and its newer customers – consumers and smaller businesses – have driven recent growth. In the short-to-medium terms the growth opportunities will be immense, as more consumers and small businesses opt for the elegant simplicity of pay-by-the-month-and-hand-it-back leasing, rather than having to stump up cash to buy a car then deal with the used car market to sell it.

The industry has benefitted from the move from ownership to usership, and as the sharing economy grows and autonomous vehicles arrive, many businesses will decide they don’t always need exclusive use of every vehicle, just guaranteed rapid access to transport that will get their employees from A to B.

This takes us into the world of ‘mobility solutions’. Whilst some fleet leasing companies are “monitoring developments in this area” (which might well be a euphemism for “we aren’t sure anything is going to happen here so will just carry on doing what we do”) others are building and introducing solutions.

Many business vehicles cover 20,000+ miles pa on mission-critical journeys. Here a dedicated company vehicle is essential and the cost per business mile is low. Some company cars travel relatively few miles each year and here the real cost per business mile is rather high. There is scope here for leasing companies to sell personal lease schemes via employers, something that was trialled without much success 20 years ago but which may have more success now. Because once vendors start knocking on the doors of fleet managers offering mobility services that slash the cost per business mile, those fleet managers will sit up and take note.

Every element of mobility services already exists – company cars, rental cars, car clubs, buses, trains, aircraft, corporate car sharing, corporate taxi services, even bike hire – but they are not yet joined up. Employees need to be offered the optimal mix of transport modes for each journey, with expenses being managed automatically and with the flexibility to make changes mid-journey, in real time, if, for example, a train is cancelled.

Whilst they are perfectly placed to build these services, most fleet leasing companies have yet to do, or even to meet academics or government agencies that work in this area or the young fintech companies that are trying to develop and roll out solutions. One definition of mobility management might be the intelligent merging of the functions currently performed by fleet industry companies, transport operators and travel management companies, to produce solutions where each journey choice is optimised for cost, timeliness and environmental impact. So a good starting point might be to explore collaboration with travel management companies.

Now would be an ideal time to introduce cost-optimised solutions based on traditional products. An employee goes onto a leasing company’s portal, enters their tax rate and annual business mileage, and the system automatically offers the optimum solution. This could be a company car (contract hire), personal car (ECO or PCH), salary increase (for agreeing not to take a company-funded vehicle), mileage allowance or mobility card – all optimised to minimise emissions and after-tax cost both the employer and the employee.

Next let’s consider data emerging from connected vehicles. In the past, data was extracted from the on-board diagnostics port and transmitted using telematics units but soon all new vehicles will transmit vehicle data via factory-fitted modems.

A punch-up is brewing between manufacturers and their customers – most notably the leasing companies – about who owns this data. The BVRLA is very active in this area on behalf of its members.  In due course no doubt the industry will have access to the vast majority of data that emanates from vehicles, allowing it to develop much better services. These will include proactive maintenance management assisted by predictive insights gleaned by trawling through real time car data and the leasing companies’ own databases.

Very few data scientist are employed in fleet leasing companies at present. No doubt this will change quite soon as the Big Data revolution unfolds. Clients and drivers will expect to see real time actionable information: last month’s raw data just won’t cut it.

Clients will also demand risk mitigation. A company car veers off the road and kills a pedestrian. Some months later, as part of a police investigation or the ‘discovery’ process in a civil action, the employer is required to deliver the data the car reported before the accident. A data specialist trawls through this and identifies a fault code that was transmitted but not acted upon, which in turn led to the accident. Employers will want protection from this sort of nightmare and will expect their leasing company to deliver that protection.

Another area where leasing companies will need to invest is operational efficiency for themselves and their clients. Technology will be at the forefront of this initiative. Leasing companies will need to embed themselves into their clients’ systems, adding value and making themselves indispensable partners. For example, sharing workflow solutions with clients, so that both companies act as one entity to ensure the client’s needs are met. This will deliver headcount reduction and the deskilling of some tasks. Leasing company employees currently need to be highly skilled yet many of those skills could be embedded in technology so that the right thing happens automatically rather than relying on a knowledgeable person to make them happen. Most likely these changes will need to reflect the fact that fleet and travel management departments will merge once mobility services arrive. And these systems will need to include smartphone-based tools to help fleet managers do their jobs and release them from their desks.

Doing the right thing at the right time, helping the client optimise their business travel, using connected car data in new ways to deliver new services, making sure that things are done just-in-time rather than just too late, striving for ever greater efficiency (ever lower levels of headcount per thousand vehicles managed) – these will mark the difference between the winners on the losers over the next few years.

And as we get go into the era of fully-autonomous vehicles, the industry will carry on doing what it is always done; adapting to client needs. Many businesses will still need properly funded and managed cars and vans, fully dedicated to the company, whilst autonomy creates a lot of opportunity for the industry. But to remain relevant it will also have to deliver mobility services to meet the needs of those employees who don’t need a dedicated vehicle.

And all of this will need to happen in real time, to avoid the disappointment that comes from looking at two-week-old data.

Professor Colin Tourick


How to be a disruptor

Article published by Asset Finance International

The International Auto Finance Network runs conferences where senior executives from the auto and fleet finance industries can meet, network, discuss the key issues in their markets and look at the major opportunities and threats that lay ahead.

I have been fortunate enough to have been involved with IAFN from the start, which has given me a very good perspective on the things that these executives think about when they are pondering the future direction of their businesses.

Most of these businesses prepare a SWOT analysis as part of their planning cycle, where they look at the Strengths and Weaknesses of their businesses and the Opportunities and Threats they face.

And most of those SWOT analyses will have an entry in the Threats box entitled ‘Threats from disruptors’.

So who are these disruptors, where have they come from, why are they suddenly such a big deal and how can an established auto or fleet finance business stave off the threat of disruption? Those are the topics we will cover in this article.

Disruptors arrive in an existing market and offer highly attractive products or services that threaten the existing ways of doing things. Typically, the people in these companies are young, have recently graduated and are highly tech-savvy.

As with most business start-ups, most of these businesses fail. This is for a variety of reasons including lack of experience, management skills or funding,

Sometimes they go off in completely the wrong direction. A good example would be the company trying to sell a digital Loyalty Card scheme to the owner of our favourite Italian restaurant. The concept, they explained, was that diners would get credits every time they came in for a meal, and after nine meals they would be entitled to a free meal at any restaurant on the scheme. When our Italian friend pointed out that his restaurant was the best in town, and that diners would be able to accrue credits in cheaper restaurants and only turn up at his place for free meals, they went very quiet and said they’d go away and think about it. They haven’t come back.

Which probably tells us something simple but important about successful disruption: if you decide to invent a new mousetrap you must make sure it works.

Most disruptors look at old problems in new ways. In some cases their technology is remarkably cheap and they get to market very quickly. It doesn’t seem to matter if their offering is immature or incomplete. Most technology is launched in a fairly basic state anyway and then refined over time, and consumers have come to expect this.

The best protection against disruption is to innovate and become a disruptor.

If we were inventing mousetraps we’d be able to patent them but in the world of asset finance and management it’s next to impossible to protect ideas, so your best protection is to keep at least one step ahead of the competition.

Disruption is a journey, not a destination. You will always be refining your product and will get things wrong. In fact you should expect to get things wrong and should budget for this. Experiment – a lot. Try things out on a small scale, ramp them up if they have promise and don’t be afraid to dump them quickly if they don’t seem to be gaining traction.

And don’t bet the shop on any one idea. At any point in time you should have several innovative ideas at various stages of development; some minor, some major and some game-changing – disruptive.

Getting the timing right is important. If you can deliver a product that works, just when the client is beginning to feel the need, you’ll do much better than if you launch too early (before the client knows they have a problem and you have to spend ages explaining why they need your product) or too late (in which case someone will have beaten you to it).

Disruptors seem to need a particular mindset. They need to be tenacious and focussed of course, and to be able to carry people with them. But they also need to be iconoclastic – willing to attack the existing ways of doing things even though it won’t necessarily make them friends at the outset.

This is interesting because you probably have people like this in your organisation right now. That guy in Finance or the lady in Sales who never seem happy with the way things are done? Typically, these people are tolerated or ignored: after all, your business works in a certain way and has done so for years, so why change things? In the new world of disruption though, these people become your internal secret weapon. They see things differently, aren’t afraid to challenge the staus quo and offer an alternative vision of the future. Use them.

Innovation labs create an environment in which ideas can be encouraged, fostered and grow. Give a small team of people a problem, a budget, access to key internal people and a timescale and leave them to do their own thing. If you like what they are doing you can implement it, if not you can dump it and won’t have cost too much. Make sure you have the right people on the panel that reviews the team’s ideas. You need people who aren’t scared of change.

Measuring demand for a new product or service is really difficult, so what can you do if you generate a massive surge in demand that you can’t cope with? You need to build this into your plans. You may need to have resources (people, business partners, management, etc) on standby – briefed and ready to react – if demand skyrockets. Outsourcing might offer a good solution, though it takes a lot longer to negotiate an outsourcing contract than to refocus resources that are already within your control.

At an IAFN conference last year the Head of Automotive at Google said that the business world was changing faster than ever and that in order to compete we should be working faster than ever before. This is a good benchmark. Is your company working ‘harder and faster than ever before’ or simply doing the things it has always done with a bit of fine tuning? Or, to paraphrase Jack Welch, ex General Electric, if things outside your business are moving more quickly than things inside your business, you’re doomed.

IAFN research identified that many auto and fleet finance companies are investing in new digital ways of doing business. If not you’re amongst them you’re going to be left behind. Investing to keep up with the competitoion isn’t enough, you need to forge ahead into new ways of doing business.

If you don’t have the internal resources to change the way you do things, or maybe lack people with the vision or experience to challenge the status quo, that’s nothing to be ashamed of – you’re in the majority. So what should you do? You could bring in external consultants, though most consultancies advise but don’t have the resources to deliver the solution. Or you could talk to leading edge suppliers to your industry – software vendors, data suppliers, niche consultancies and potential outsource partners – and companies in similar industries, both B2B and B2C – to gain new insights and perhaps a vision of the art of the possible. Only then can you decide how to forge forward.

Disruption and innovation can arise in multiple ways but it will be worthwhile – perhaps essential – to look at some emerging technologies and see how they can be applied to your business. You need to become familiar with artificial intelligence, big data, deep learning algorithms, automated process flow, modern CRM workflow, cognitive computing, predictive analytics, machine-learning and natural language processing. If you mainly rely on a website to communicate with your clients, you’re way behind the pack.

Rather than aiming to increase the bottom line by 5% next year, why not ask how you might increase it by 100%? And perhaps the bottom line shouldn’t be the place to look first, because if you want to transform your business it should perhaps come from top line revenue growth first rather than bottom line profitability. The bottom line is of crucial importance of course, but if you start with the bottom line in mind and you could get bogged down with thoughts about cost reduction rather than thoughts about explosive revenue growth, and that’s where you need to be.

Interestingly, in the brave new world we live in, it seems that an awful lot of people don’t spend much time looking at the bottom line. Just look at the extraordinary valuations of some giant companies that have yet to turn a profit.

And that’s what managers are there to do – deliver shareholder value.

It’s time to move Disruption from Threats to Opportunities in your SWOT analysis.

Professor Colin Tourick



It’s time to look at tax

Article published in Fleet World

Tax isn’t the most fascinating of subjects for most people. However, as a fleet manager a knowledge of tax is unavoidable because every decision you make – including whether you offer company cars or a cash allowance, which cars to put on your fleet, how to finance them, how to pay for maintenance costs, etc – has a tax consequence.

In this article we will look at two taxes that are about to increase sharply and discuss ways you might reduce these.

The first tax is vehicle excise duty. The system is due change from 1 April and there is still time (just) for you to take steps to make some savings.

This chart shows the old and the new VED rates:


Cars registered before 1 April 2017 Cars registered on or after 1 April 2017
CO2 emissions


First year rate Standard rate CO2 emissions (g/km) First year rate Standard rate for petrol or diesel*


Petrol and diesel Alternative fuel cars#
Up to 100 £0.00 £0.00 0 £0 £0 £0
1-50 £10 £0 £140
51-75 £25 £15 £140
76-90 £100 £90 £140
91-100 £120 £110 £140
101-110 £0.00 £20.00 101-110 £140 £130 £140
111-120 £0.00 £30.00 110 -130 £160 £150 £140
121-130 £0.00 £110.00
131-140 £130.00 £130.00 131-150 £200 £190 £140
141-150 £145.00 £145.00
151-165 £185.00 £185.00 151-170 £500 £490 £140
166-175 £300.00 £210.00
176-185 £355.00 £230.00 171-190 £800 £790 £140
186-200 £500.00 £270.00
201-225 £650.00 £295.00 191-225 £1200 £1190 £140
226-255 £885.00 £500.00 226-255 £1700 £1690 £140
Over 255 £1,120.00 £515.00 Over 255 £2000 £1990 £140

*£10 discount for non-electric cars emitting any CO2

#Alternative fuel includes hybrids, bio-ethanol and LPG

There is an additional £310 payable for five years after the first 12 months for cars costing over £40,000 that were first registered on or after 1 April 2017.


Fuel Standard annual rate Additional rate Total annual payment
Electric £0 £310 £310
Alternative £130 £310 £440
Petrol or diesel £140 £310 £450

After 5 years, the standard annual rate is payable, depending on which fuel the vehicle uses.

We now have a system that is more complicated than before. The first thing to notice is that VED is now going to be payable for the first time on cars emitting less than 101g/km of CO2. Quite a lot of VED, in fact: £680 over four years for a diesel car emitting 91-100g/km (first year rate plus standard rate). You can add another £930 to that if the list price exceeds £40,000. This will annoy fleet managers who made a conscious effort to move their employees into low emission cars.

According to the Department of Transport, the national average emission level for all new cars is 120.8g/km.

The latest BVRLA figures show that new cars added to their members’ fleets in Q4 2016 emitted an average of 110.9g/km. This falls by about 2g/km each year, so we can deduce that the average fleet car will probably be emitting just below 110g/km very soon. VED is currently £20 per pa for those cars or £80 over a four year life, but for cars registered from 1 April that £80 will become a whopping £700 (£1,630 if they cost over £40,000). That’s a hefty increase that won’t have been accounted for in most fleet managers’ budgets.

There is a very small window of opportunity left for you to save that extra amount – order new cars now and have them registered before 1 April. In fact, if you can get any new sub-120g/km car on the road before 1 April you’ll save hundreds of pounds in VED.

The other way you can save VED for a short while after 1 April is by buying (or leasing) a nearly new car, because it’s the vehicle registration date that determines the VED treatment rather than the date you take it onto your fleet. There are always lots of pre-registered cars in the market. Now might be the time to ask your dealer or leasing company if they can get hold of one for you. The lease rental will be quite a bit lower too.

The other tax to be aware of at the moment is benefit in kind (BIK) tax on company cars.

The general rule is that BIK tax is calculated by multiplying the list price of the car by the employee’s marginal tax rate and the ‘appropriate percentage’ shown in this chart.




2016-17 2017-18 2018-19 2019-20
























51-75 11% 51-75 13% 51-75 16% 51-75 19%
















95-99 16% 95-99 18% 95-99 20% 95-99 23%
100-104 17% 100-104 19% 100-104 21% 100-104 24%
105-109 18% 105-109 20% 105-109 22% 105-109 25%
110-114 19% 110-114 21% 110-114 23% 110-114 26%
115-119 20% 115-119 22% 115-119 24% 115-119 27%
120-124 21% 120-124 23% 120-124 25% 120-124 28%
125-129 22% 125-129 24% 125-129 26% 125-129 29%
















135-139 24% 135-139 26% 135-139 28% 135-139 31%
140-144 25% 140-144 27% 140-144 29% 140-144 32%
145-149 26% 145-149 28% 145-149 30% 145-149 33%
150-154 27% 150-154 29% 150-154 31% 150-154 34%
155-159 28% 155-159 30% 155-159 32% 155-159 35%
160-164 29% 160-164 31% 160-164 33% 160-164 36%
165-169 30% 165-169 32% 165-169 34% 165 and above 37%
170-174 31% 170-174 33% 170-174 35%
175-179 32% 175-179 34% 175-179 36%
180-184 33% 180-184 35% 180 and above 37%
185-189 34% 185-189 36%  

Add 3% for diesel cars, up to a maximum of 37% in total.


190-194 35% 190 & above 37%
195-199 36%
200 and above 37%


The appropriate percentages will rise substantially over the next few years, particularly for drivers of lower-emission cars. Whilst the actual tax paid by these employees will still be relatively low, the annual percentage increases will be high. So, for example, an employee currently driving a car emitting 99g/km will see their appropriate percentage rise from 16% to 23% in just over three years’ time, a whopping 43.75% more than they are paying today.

So what can you do when these employees start grumbling about this steep increase?

One option would be to see whether there are cars that emit lower levels of CO2 that might be suitable to put onto your fleet list.

Another interesting option would be to check to see whether there are savings to be made from encouraging employees to lease their own vehicles direct from your leasing company using a personal contract hire agreement. You would pay them a cash allowance and they could claim for business mileage at the HMRC approved rates. It is important – really important – that you don’t let this become a free-for-all with employees going off and doing their own thing, because very soon you’d find yourself doing more work to ensure that these cars are being taxed, insured and serviced on time.

Yet another option would be to look at setting up an Employee Car Ownership Scheme (ECOS). These have fallen out of fashion but it seems there may be a resurgence afoot, and at least one leasing company has just started offering these to relatively small fleets.

If you want the best possible solution – total control, lowest cost – you could opt for a hybrid ECOS/contract hire scheme. These represent the gold standard in cost-optimisation. They aren’t for the feint hearted but they really do tick a lot of boxes.

Every ECO scheme gets HMRC approval but there was some ambiguity around the treatment of AMAPs in the wording of the draft finance bill relating to salary sacrifice and cash allowances.  This should be resolved within the next few weeks so we won’t go into details here. However, if you decide to explore changes in your funding method, make sure you get professional tax advice.


Professor Colin Tourick


Britain Under The Bonnet report


Dealers have been under pressure for years. To maximise turnover they have to invest in large, expensive premises in prime locations and to hold large stocks. If they have a manufacturer’s franchise they need to invest heavily to meet the manufacturers’ standards. When they sell a new car to a consumer they come under pressure to discount the new car price or ramp up the trade-in price and when they sell to a business or a leasing company they make very little indeed. Servicing and repairs used to offer a good opportunity for revenue but this has been trimmed back with the rise of independent garages and fast-fits, whilst most manufacturers have lengthened car servicing intervals. Used car sales can offer good profit opportunities but here again the dealer is constantly under price pressure.

So dealers reading this report will be encouraged to note that consumers still value them highly and that, for nearly a half of the consumers surveyed, going to the dealer for advice was their first step in the buying process. Whilst most buyers tend to do their research online, those that went to a dealer instead spent on half as much time choosing their car. It seems that the internet is great for feeding up information but perhaps not so great as a seasoned car salesman at answering questions.

As the report says, the internet isn’t going to mark the end of car dealers any time soon, and it is encouraging to note that most dealers are positive about the next 12 months.

Another interesting insight from the report is that Millennials – those aged 19-35 – are 50% more likely to acquire a car using finance than older buyers. This is clearly driven by the fact that so many people start their working lives these days with £45,000+ of student debt and simply don’t have the cash to buy a car. This will be music to dealers’ ears because finance commission offers dealers a good revenue stream.

Pre-registrations continue to be a feature of the market, as the report makes clear. Dealers don’t like having to pre-register cars: it uses up credit lines and makes them take on additional risks. The fact is that if pre-registrations were to grow it would make it ever more difficult for manufacturers to sell new cars. Why pay list price for a new car when you can buy one 90 days old that has driven negligible mileage for 20% less?

As the report makes clear, Brexit is casting a shadow over the industry and making dealers concerned about a new recession.

Whilst the likely outcome of the Brexit negotiations is neither known nor knowable, the report offers food for thought for dealers as we move into uncertain times:

  • With so many buyers carrying out online research before entering a dealership, how can you alter your web presence to encourage those online researchers to take the next step and walk into your dealership?
  • With economic uncertainty, buyers are likely to defer replacing their cars. How might you reorganise your sales and marketing operation to make sure that you don’t end up losing volume? Better IT? Better use of data? A more proactive approach to selling?
  • The growth in new car sales in recent years is delivering large numbers of used cars into the market. Buyers will have lots of options so dealers will have to choose the right stock to hold, price it keenly and be proactive in trying to find buyers. (You sold a 3-year-old used car to Mr X 3 years ago? Now might be just to time to call him to see if he wants a replacement).
  • Women now account for a significant proportion of buyers. How could you tailor your sales approach to be more sensitive to gender differences?
  • Is now quite normal for buyers to walk into a dealership and find they know more about a car or a service than the salesperson. This reflects badly on your dealership and makes it less likely you’ll win the sale. Is your staff training up to scratch?
  • Consumers said that, when buying a car, engine size is the most popular consideration (56% of respondents), followed by the manufacturer (52%) and its efficiency (46%). Clearly, consumers don’t realise that brake horsepower and time to 60mph are better determinants of a good driving experience than engine size. Is this something your salespeople might tell prospective customers?

As you make your way through this fascinating report you will find valuable insights into steps you might take to ensure that your business thrives in the future.

Professor Colin Tourick MSc FCA FCCA MICFM

University of Buckingham