New Benefit-in-Kind statistics published by HM Revenue and Customs, which appear to show that the number of company car drivers has fallen by 50,000 year-on-year, may be skewed due to a change in payroll accounting practices.
Since 2009-10, the number of company car drivers has remained relatively stable at just under 1 million. But provisional figures show a fall from 940,000 in 2016/17 to just 890,000 the following year – a drop of 5.3%.
However, the tax-man admits that because of the way in which companies have been able to record their company cars in recent years, through a method known as voluntary payrolling, this could account for a “significant proportion” of the decline in reported numbers.
Voluntary payrolling was introduced in 2016 to ease the reporting burden of recording benefits in kind, with employers moving away from submitting P11D returns to collecting tax on company cars through payroll.
However, employers were not able or required to submit more detailed information about company cars when using the new regime.
This changed from 2017-18, when employers recording the car benefit through their payrolls were able to provide more detailed data about the cars being provided through their FPS (Full Payment Submission). But, says HMRC, providing this data was not mandatory until 2018-19.
As such, detailed information about the number of company car drivers going through voluntary payrolling was not provided by many employers during the period covered by the latest statistics, with the implication that the numbers may well be understated and not present a true picture.
The expectation is that next year’s BIK statistics from 2018/19 will include any company car recipients that could have been previously hidden, and give a clearer indication. It will only be then that the fleet industry will be able to get a more accurate understanding of the number of company car drivers choosing cash instead of a car.
Many studies appear to suggest that more employees are considering selecting cash options rather than the company car due to a number of factors, such as rising tax bills, the impact of the WLTP emissions testing regime and uncertainty over the most appropriate powertrain to select.
A poll by industry publication, Fleet News,last autumn suggested that three-quarters of respondents were seeing an increasing number of employees choosing cash rather than a company car.
Prior to these latest HMRC figures being published, Lex Autolease, the UK’s largest car leasing company, has suggested that numbers of company car drivers will decline in coming years due to tax changes and the impact of WLTP.
Mike Manners, managing director of CBVC Vehicle Management, commented: “What is needed is greater clarity on policy from Government towards the tax treatment of company cars and other benefits, as we have been kept in the dark for too long.
“It is not surprising that growing numbers of company car drivers may be looking at other options, such as personal leasing, when they are still waiting to hear how the Government may account for increases in CO2 values due to WLTP.
“Although we’ve heard nothing yet, the deadline for its introduction is fast approaching and the new measure is to be used for tax purposes from April next year, and for BIK tables from 2020/21.
“We need some form of indication sooner rather than later, as many company car drivers are not able to make purchasing decisions because of the uncertainty. Once we understand the full impact of WLTP on BIK rates, company car drivers will be able to make more informed decisions,” he said.
