Inland Revenue evaluation of company car tax reform

COMPANY CARS

Changes to the tax regime for company cars have "clearly changed the way businesses think about car fleet policies and changed the behaviour of those choosing company cars", according to research by the Inland Revenue.

The new car tax system was introduced in April 2002 following an announcement in the 1999 Budget. It was designed to provide financial incentives for employers and company car drivers to choose cars which produce lowers levels of CO2 emissions.

The key findings of an evaluation of the impact of the tax reform by the Inland Revenue are as follows:

The Inland Revenue estimates that due to the company car tax reform, some 300 to 400 million fewer business miles have been travelled in the UK in company cars in 2003/03 compared to the previous year.
Over half of employers who provide company cars have changed their policies towards CO2 emissions and are actively encouraging their employees to switch to cars with lower emissions.
There has been a significant reduction in the number of company cars in the UK. The Inland Revenue reckons that in the two years to November 2003 there was a decrease of around 250,000 company cars from 1.6 million to 1.35 million. "The reform of the company car tax system does appear to have been a factor in this reduction alongside the increased popularity of cash alternatives and employee car ownership schemes," the report says.

Want to know more?

Title: Company Car Tax Reform Evaluation Report, Inland Revenue.

Availability: This free 26-page report is available to download in PDF format from the Inland Revenue web site at www.inlandrevenue.gov.uk/cars/company_cars.htm

Posted 1 July 2004