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Mon 2nd Apr 2012

Businesses in for a shock as BIK rules change

Businesses in for a shock as BIK rules change

The Government’s decision to shift the BIK thresholds from this April means employees and employers alike are facing greater expenditure. Jack Carfrae examines the impact, which for some companies could be very significant. 

It’s no secret that the goalposts for company car taxation are about to change with the arrival of the new financial year, but some businesses are still in for a shock.

The Government’s tactics to continuously put the squeeze on emissions levels will render a number of vehicles that are currently considered clean, economical and cost-effective choices by the fleet community significantly more expensive for companies and employees alike.

The most hard-hitting impact for many will be the removal of the qualifying low-emissions car (QUALEC) 120g/km threshold at the turn of the financial year in April. Vehicles emitting between 99-120g/km stand to be most affected by the move, with increases in BIK of between 1% and 5% depending on the exact CO2 figure. Cars with emissions levels of 120g/km will see the single biggest increase, rising from their current BIK figure of 10% to 15%, with the addition of the continuing 3% penalty for all diesels. Employers will also be hit with an increase in National Insurance Contributions as a result, so they can also expect to be paying more per vehicle.

Mike Brazel, specialist cosultant at Leaseplan, makes it plain that companies and their staff are in for greater expenditure in the immediate future. “In the short term, there will be added cost to the industry. Vehicles emitting between 99-120g/km will be most affected by the changes as they will lose between 1% and 5% of the 5% QUALEC discount that impacts both employer National Insurance Contributions and the employee benefit-in-kind payment discount.”

According to Brazel, vehicle manufacturers that have used the 120g/km benchmark as their primary hook for sales stand to be hit the hardest by the changes, but until a new wave of models arrives that can duck under the new regulations, some business car users are likely to revert to buying vehicles on the strength of the product and its value for money, rather than basing their buying decision on the headline emissions figure.

To read the full article in Business Car, please click here.