Announcing extended company car benefit in kind taxation tables should be “among first fleet jobs” for the new government, says the Association of Fleet Professionals (AFP).

The industry body says it is now nearly two years since the current tables were announced and they only run until the 2027/28 tax year, meaning fleets buying vehicles today don’t know the tax rate their drivers will be charged towards the end of the decade.

Paul Hollick, APF chair, said: “There’s been something of a structural change in recent years, with the popularity of electric company cars on fleets meaning businesses have started operating longer replacement cycles to help offset their higher purchase cost, rising from typically three years to four or five.

“This means that we need the benefit in kind tables to extend longer into the future than was previously the norm. Our AFP Tax and Regulation Manifesto launched last week and one of its key demands is to see company car tax settled at least until the 2029-30 tax year. Clear, positive signalling is needed from the government to instil confidence for fleets buying future vehicles.

“In our view, this should be among the first fleet jobs for the incoming government, whoever that turns out to be, otherwise fleets are buying ‘blind’ without being able to tell drivers what BIK tax they will be paying in the future. That’s simply unfair.

“After a general election, the chancellor will normally create a Budget or Fiscal Statement within the first couple of months, and we’d very much like to see the new tables announced at that point. It’s an easy task and would create a much higher degree of certainty.”

Paul said that the AFP broadly accepted that benefit in kind rates on electric company cars would increase over time as they became widespread on fleets, but that it was important to maintain an incremental approach.

“Benefit in kind taxation on electric company cars has been rising at about one per cent every year and we believe that increases higher than this could easily prove counterproductive. While electric power has become almost the norm for many operators, it is largely the low hanging fruit that has been picked and we’re entering a more difficult phase.

“We’re now working our way through these trickier applications, notably where drivers don’t have charging available at their home or nearby, something that won’t be resolved properly until on-street charging infrastructure becomes widespread across the country. For these employees, low benefit in kind taxation is an important incentive to offset inconvenience.

“Also, as has been widely discussed, adoption of electric vans is proving much more difficult than for cars, and zero benefit in kind taxation for those van drivers should be maintained as long as possible in our opinion, alongside continuing exemption from road tax.”

The AFP Tax & Regulation Manifesto 2024 can be downloaded here

A comprehensive new report on electric vehicle (EV) service, maintenance and repair (SMR) from the Association of Fleet Professionals (AFP) underlines the “real world” difficulties of setting budgets in what remains a relatively new discipline.

Produced in conjunction with fleet consultancy, Expense Reduction Analysts, it shows significant variations in the SMR budgets allocated by vehicle leasing companies for particular models over the length of a contract.

Paul Hollick, chair at the AFP, said: “For some time, there have been conversations across our membership about leasing company EV SMR, with questions asked about some of the costs being charged. As a result, a number of fleets have unbundled the SMR element from their lease and either brought management in-house or employed a specialist third party.

“The fact is that EV SMR is a relatively new management discipline and, in most cases, setting an accurate budget is a long way from easy. There are few or no historical precedents and even the most well-informed experts have limited data available. There are lots of projections around of varying value but limited real world experience. Leasing company fleets are in the same boat as everyone else when it comes to this.

“However, we have found variations that in a few cases run into four figures between SMR budgets set for same vehicle by different leasing companies. Our advice is that fleets should engage in an active dialogue with their suppliers where they feel that the budgets set are incorrect. This is very much an industry conversation.”

An interesting aspect of the research is that certain leasing companies seem to quite dramatically favour certain manufacturers, specific models and even types of EV when it comes to setting budgets.

Paul said: “Generally, dedicated EV manufacturers have much lower servicing budgets applied by leasing companies compared with other brands, we have found, particularly when set alongside the German premium manufacturers.”

The report also breaks down the different elements of EV SMR and finds that the budgets allocated to tyres are the most problematic, he added.

“Tyres make up the vast majority of EV budgets and it does seem clear that these vehicles tend to wear them out faster than petrol or diesel cars, while the tyres themselves are generally more expensive and sometimes are designed with lower tread.

“This expense can largely counteract the lower servicing and inspection costs EVs enjoy compared to internal combustion engined vehicles. Furthermore, the increased weight of EVs and their high torque levels mean that wear rates will depend very much on how vehicles are driven, leading to large potential variances in cost even from driver to driver.

“All of this represents a higher financial risk to lessors and could account for a large part of the budgetary variances we are seeing.”

Copies of the EV SMR Report are available to AFP members only. The report can be downloaded from the Resources section of the Members Area – Login (theafp.co.uk)