Member Article

Budget problems for motor manufacturers?

Motor manufacturers face the prospect of a range of cars no longer having a market in the mainstream company car arena following measures laid out in last week’s Budget. Accountants in the North East have been studying a number of environmental measures which could impact on company car fleets.

Stuart Cottee, Tax Partner at Deloitte Newcastle, said: “Companies have until now not paid great attention to their fleet’s CO2 emissions believing that any cost impact would only affect the driver. Companies will now need to bring tax into their calculations of the whole life cost of their fleet.”

“Tax relief for company cars will depend on the level of CO2 emissions. 160g/km and 110g/km will become key benchmarks. At the moment 160g/km is the one that will have an impact. There will be a big difference to the cost to the company of a car with emissions of 161g/km compared to one with 160g/km, all other things being equal.”

The Vehicle Excise Duty (VED) changes outlined in Mr Darling’s Budget also came under scrutiny. The team at Deloitte predict that the resale value of company cars will fall due to the new measures.

Stuart Cottee said: The second and third hand resale values may fall dramatically. Multiply this across an entire company fleet and tens of thousands of pounds could be wiped from the re-sale values.

“Although it will take time for companies to realise the effect, questions will now be asked about the whole life tax cost of high emission vehicles. I expect a range of cars will no longer have a market within the mainstream company car arena. Automotive manufacturers will need to consider the implications of these measures very carefully and take necessary steps to adapt to a new reality in the company fleet market.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .