Government Review on WLTP; What does it mean for CBS customers and company car drivers?
Our latest white paper explores the impact of the Government decision regarding BIK ratesTags: Automotive ECOS Taxation
Impact of the WLTP review on company car tax
On face value the Government review into WLTP and their subsequent response seemed to offer a reprieve for company car drivers. Their announcement that BiK rates are to be frozen for cars registered before 6th April 2020 and a 2 percentage point reduction for cars registered thereafter appeared to reverse the trend of escalating costs for company car drivers.
However, upon closer review of the impact of WLTP on reported CO2 emissions, it is apparent that the cost increase for company car drivers will outweigh the adjustment made by the Government following this review. Evidence provided as part of the Government review suggests average increases of between 20% – 25% across both Petrol and Diesel derivatives, with above average increases for smaller engines and lower emitting cars.
Impact on Benefit in Kind of 20% increase in CO2 values due to WLTP
In real terms this means that company car drivers will continue to be liable for significant increases in company car tax over the next 3 years, with the average monthly cost reaching almost £400.
Click here to view our latest white paper which explores the ramifications of the results of the review in detail
Impact of the WLTP review on Employee Car Ownership Schemes (ECOS)
The changes announced in the Government review on WLTP have no direct impact on the provision of Employee Car Ownership Schemes. However, any material increase in company car taxation increases the viability of employee car ownership.
Initial analysis of the impact on company car tax suggests that the benefit of your current ECOS provision will increase between now and 2023 as Benefit in Kind increases at rates well above inflation.
Vehicle choice should also increase as more vehicles become a viable alternative to a traditional company car, based on a cost of ownership comparison.
VED increases will impact cost of ownership as with any new vehicle purchase.
Company Car Drivers
Businesses can protect employees from further increases in company car tax as the average monthly repayment approaches £400 per month*
Dealers can remove the restrictions of company car tax, increasing vehicle selection, whilst managing affordability for employees.
Businesses can remove the uncertainty surrounding company car tax and cost of ownership over the duration of their current agreements, whilst removing the burden of p11d reporting.
Impact on Benefit in Kind (BiK) of 20% increase in CO2 values due to WLTP – Based on CBS ECOS Fleet
It is clear that the benefit of implementing and operating Employee Car Ownership Schemes will increase in the next 3 years for conventional fuel vehicles which still represent that vast majority of the market for company cars.
This delivers enhanced control for employers in terms of vehicle selection and the level of benefit provided for their employees, whilst removing the administrative burden of p11d reporting.