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Debate This week we ask: Is it time for the construction industry to look at alternatives to the company car?

Company cars

With the government committed to reducing car use and new company car tax laws due next April, the introduction of new style car number plates could be the first sign of big changes for the business driver.


Where once we had around 800 company cars we now have very few, apart from a small number of cars out on site. This follows a decision to formally phase out company cars from March 2000 and to stop replacing them completely by March 2001. Instead, we offer a cash allowance, plus interest free loans for season tickets or to purchase bicycles.

The formal decision was triggered mainly by the forthcoming changes in the company car taxation rules, but it also recognised the fact that 60% of the staff eligible for company cars had already opted for the cash allowance instead.

We wanted to release staff from a policy of tight control and give them the flexibility to choose their car at the same time as accumulating a personal asset. A large number of our UK staff are in London, and the cars were really perks rather than tools of the trade. All the signs are that most staff prefer the new policy and support the environmental benefits involved.

Our offices provide showers and bike racks, and the policy of not supplying cars applies across the company, right up to director level.

Alternatively, those who already have company cars are offered a very good deal if they want to buy them at any time during the five years we used to keep them.

Actually, one of the hidden benefits is the elimination of those endless tedious arguments about exactly what extras and gadgets people were allowed to have on their chosen models.


For a contractor the company car is an essential tool. Less than 10% of the 4,500 cars in our 7,000 vehicle fleet could be described as perks, the rest work hard for the company. However, there is a lively debate over the potential advantages of changing the system of company owned and supplied cars to a personal contract purchase scheme.

Balfour Beatty has thoroughly investigated the issues raised by this debate. The clear balance of advantage lies in sticking with the company provision system.

First, there is potential for the new schemes to attract taxation penalties and these are already being considered by the Inland Revenue.

For individual employees, retaining the company car is a hassle free way of getting a new car on a regular basis, conveniently looked after by the employer. Equally, the company car figures highly in both recruitment and retention of staff.

Employers would relinquish several important areas of control by opting for a personal contract purchase scheme.

Retaining control over the suitability of the vehicle helps maintain a company's image. This ensures vehicles are appropriately insured, road worthy, regularly serviced and maintained.

Employers have a duty of care to look after employees when they are driving on company business - there is less responsibility on an employer as far as the Health & Safety Executive is concerned.

Furthermore, I strongly believe that by retaining control of the fleet a company can ensure it makes appropriate advances in the use of environmentally friendly vehicles. We encourage our staff to opt for diesel cars and regularly carry out trials on alternative fuels. Another advantage is that a proper system of driver training is maintained. It is impossible to manage safety if you do not control the fleet.

I do not believe contract purchase schemes will ever seriously challenge the popularity of the company car. They offer no advantages to the company and there will continue to be a lack of confidence among company car drivers over future tax changes.

The facts

This year the Society of Motor Manufacturers & Traders hopes to beat 1989's record by selling more than 2.3M vehicles. Of these, 51.5% are expected to go to company or car hire fleets, a slightly lower percentage than earlier years. The biggest change since 2000 has been a staggering 242% increase in diesel car sales in the first seven months of this year.

According to Friends of the Earth, company cars make up only 8% of all vehicles on the road but account for 20% of car traffic. They travel a staggering 45bn miles a year.

A company car is said to do 35% more commuting than a privately owned vehicle and is up to 50% more likely to be involved in an accident.

Currently the taxable benefit of a company car is calculated on a combination of its purchase price, age, and the business miles covered in the tax year. As taxable benefit drops by 10% for every mileage band, there have been suspicions that some drivers go on unnecessary journeys to get their mileage total over the next threshold.

From April 2002 taxable benefit will be calculated only on purchase price and carbon dioxide emissions. Maximum taxable benefit will be the same, at 35% of purchase price, but a vehicle with an official emission figure of 165g of CO 2 per kilometre will be taxed at only 15%. Diesel cars will carry a 3% premium to reflect higher CO 2 emissions, but this, and their higher initial price, is usually offset by significantly better fuel consumption.

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