In her debut blog for FleetPoint, Kate Carty looks at how fleets can take advantage of changes to taxation rates
Although we have just voted in the new Government, it is worth remembering that now is not the time to be sitting on your laurels if you are in the fleet industry. On the contrary, those which take a flexible approach to fleet strategy are in the best position to take advantage of changes to BIK and taxation rates.
Taxation changes combined with innovative measures by the automotive industry, means it is likely vehicle CO2 figures will continue to reduce significantly, especially considering more alternatively fuelled vehicles are becoming available and are increasingly viable options for fleets.
However, utilising this technology on the fleet should only be the first step. A four-year-old vehicle can quickly become outdated compared with new models. In 2015, a new car may offer savings in fuel, CO2 and associated NI costs, but four years later this same vehicle can become an expense for both the driver and employer as governing laws, such as tax bands, change.
At Hitachi Capital, we continuously look ahead, reviewing policies to ensure they are as ‘future proof’ as possible. For example, as BIK bands continue to rise, we have seen more fleets revisit the optimum term and mileages of new contracts. Whereas four year contracts have become commonplace, due to the BIK increases year-on-year, some fleets find it more cost effective to look at shorter term contracts, especially taking into account advancements in technology.
Flexible contracts may also become more viable options for the same reasons, but an open mind on fuel types, CO2 caps, terms and mileages should be considered by fleets.
Whole Life Cost is still the best methodology for calculating total cost of ownership and setting policy choice. This should include Corporation Tax, Class 1A NIC and fuel rates, as most areas will change annually if not more often (i.e. fuel costs).
Using this approach, we can take into account things like removal of the 3% diesel surcharge from April 2016. For higher business mileage users (25k p.a.), diesel vehicles on three or four year contracts can still be considered one of the most cost effective options but for lower business mileage drivers (sub 15k p.a.), petrol or an electric vehicle on a two year cycle could be worthy of consideration and can often be more cost effective.
By taking this considered approach and looking ahead, Hitachi Capital is able to look ahead at new, innovative products ‘beyond the brochure’. By reviewing changes, such as increases in BIK in 2016/17 for zero or ultra-low emission vehicles, we are able to offer solutions that continue to deliver; whether this is in reduced emissions, optimised fleet solutions or simply bottom line cost savings. Future proofing the fleet also means Hitachi Capital can help keep personal tax for employers at a sensible level for the duration of the lease, avoiding vehicle choices which deliver savings now becoming expensive decision in the future, maintaining engagement with company car and salary sacrifice schemes.
The key is to remain flexible in your approach; both now to new technology and to the laws that will govern it in the future.
Kate Carty is National Accounts Manager at Hitachi Capital Vehicle Solutions, one of the UK’s leading vehicle specialists