By Anthony Mehigan By Anthony Mehigan 12 April 2000Transport is a key

By Anthony Mehigan

By Anthony Mehigan
12 April 2000Transport is a key policy area for the Government, if somewhat controversial, and ministers have made a public commitment to introducing transport policies that result in environmental improvements.One consequence will be substantial changes to company car taxation over the next few years and the average company car driver can expect to find himself or herself paying an even higher financial price for the comfort of an employer-provided vehicle.Cars have been much in the news in recent months. A fierce debate continues to run over the level of new car prices in Britain, with a growing number of companies sourcing vehicles for company car fleets from the Continent perhaps via one of the several internet sites now offering this service. The cost savings to be made are clearly attractive but less apparent are the implications for residual values, warranty periods and maintenance contracts, which should not be overlooked.Meanwhile the Competition Commission report into the UK car market, published on Monday by the Department of Trade and Industry, has reignited a heated debate on car pricing and in particular the issue of list price and fleet discounts. From the Chancellor’s point of view, any drop in list prices will dent his tax calculations. He has just announced major changes to the current system of company car taxation from April 2002, under which list price remains the starting point for calculating taxable benefits in kind.The second determining factor for calculating the benefit-in-kind charge from 2002 is that carbon dioxide emissions replace business miles. The environmental objective underpinning this change is the Government’s belief that the current system based on mileage acts as an incentive for company car drivers to undertake ‘unnecessary’ business miles. They believe these “unnecessary” journeys may amount to between 100 million and 300 million miles every year.

While it is difficult to verify the validity of these figures, there is strong anecdotal evidence to support the Government’s view.At the same time, the reduction in the benefit for cars more than four years old is being removed, presumably to encourage the use of newer, “greener” vehicles. Overall, employees who drive fewer than 2,500 business miles each year are likely to see a reduction in their tax charge from 2002 and those driving at least 18,000 business miles a year, an increased tax liability.This is likely to produce some peculiar results, with perk drivers being potentially taxed at a lower rate than those employees who regard their car as a tool of the job. It will be interesting to see whether the Chancellor responds to any pressure to reintroduce discounts for drivers with high business mileage for broader political reasons.The Government has been careful to stress that the changes will be revenue neutral. But an analysis of many company car fleets indicates that, while there are a good number of drivers who travel more than 18,000 business miles each year, there are relatively few who report driving less than 2,500 business miles. The aggregate tax charge for many fleets may therefore rise.Furthermore, the reference to revenue neutral is as compared with the yield in the tax year immediately preceding the reform.

Reading between the lines, this leaves open the option for the Government to increase company car taxation further for 2001-02.The Government has also produced figures suggesting that abolishing business mileage discounts will save some 250,000 employers £25m a year. This is said to result from the fact that business mileage records will no longer need to be maintained. If it proves to be true, this is clearly very welcome.But the logic of this comment needs questioning, as the requirement to keep mileage records in connection with fuel provision remains. It seems unlikely that pointing to a Budget press release as justification for not having retained mileage records will satisfy a request from the Inland Revenue three years on to provide evidence you do not supply fuel for private motoring.For the million company car drivers in the UK who get free fuel for private motoring, 6 April brought an unprecedented increase in their taxable benefit of almost 41 per cent. This was way beyond the 20 per cent rise for each of the five years to 2002, announced in 1998.If this continues, it is likely to prompt more employees to conclude that the tax cost of the fuel benefit is greater than the true cost of the fuel, and look to their employers for more tax-efficient forms of remuneration. As an example, with petrol prices at £3.50 per gallon, a 40 per cent taxpayer with a 2,200cc company car on 30mpg would need to travel at least 11,000 private miles each year to benefit from employer-provided free fuel.While many employers argue that employees will continue to use cars until suitable public transport options are available, they need to begin considering alternatives to company cars.

These may include cash allowances, easing personal contract purchase, or encouraging employee-ownership arrangements. The UK is one of, if not the, biggest providers of company cars in Europe. This may be about to change.The author is a partner at Arthur Andersen, specialising in employee remuneration and heading the firm’s Cars Consultancy Group.. The Government’s battle with the House of Lords over the introduction of a lower age of consent was rekindled yesterday as peers renewed their opposition to equalising the age for both sexes at 16. The Government’s battle with the House of Lords over the introduction of a lower age of consent was rekindled yesterday as peers renewed their opposition to equalising the age for both sexes at 16.
But in a surprise tactical move they did not throw out the Sexual Offences (Amendment) Bill at the second reading.

Instead they decided to allow it to proceed to its committee stage for further debate. This was to head off a threat by ministers to implement the Parliament Act, under which a Bill is forced on to the statute book if peers insisted on throwing out the measure for the third time in less than two years.Peers can now delay introduction of the legislation until summer by tabling wrecking amendments and forcing a so-called constitutional ping-pong with the Commons.Opening the debate, the Attorney General, Lord Williams of Mostyn, said an unequal age of consent was a mark of an “intolerant society” and should be changed now “for action, equality and for justice”. He offered a concession to opponents of the move, led by the former Tory leader in the Lords, Baroness Young, who have contended that the Bill is flawed and that there are insufficient safeguards to protect youngsters from those in a position of trust, such as youth workers, step-parents and baby-sitters.He said he recognised and had “every sympathy with this”, that many said the abuse- of-trust definition provisions did not go far enough. He said it had been pointed out it did not, for example, include Scout and Guide organisations. “I do accept we may need to look at this.” And he said there were powers to extend the scope of the new powers “at a later date if there is later demonstrated evidence of need”.But Baroness Blatch, the Tory education spokeswoman, said: “What is this government’s obsession with sex and sexuality?” Lady Blatch said those who argued against lowering the age of consent for homosexuals on moral and child- protection grounds were attacked as “prejudiced, bigoted and exclusive I refute those criticisms most strongly. Buggery on girls of 16 is made lawful by this Bill – a practice which must be a nightmare for parents, not to mention the girls themselves”.The Bishop of Gloucester, the Rt Rev David Bentley, said that by appearing to “legitimise” homosexual activity at an earlier age “we are giving unhelpful and muddled signals to many people who look to us to enunciate clear moral principles”.Lord Waddington, former Tory home secretary, condemned lowering the consent age as “not a mark of tolerance; it is an act of great irresponsibility”.