IMI Magazine

Gram slam for fleet

In the fall-out from this year’s April Budget, virtually all the motor industry-related headlines were prompted either by the proposed changes to vehicle excise duty (VED), the first-year-charge for new registrations of so-called gas-guzzlers, or the postponement of the two-pence-per litre fuel duty increase.

Tax changes to company car Capital Allowances crept in on carpet-slippers, yet they could have more far-reaching consequences for the motor industry, the fleet sector and the retail market than the headline-grabbers.

To get the full picture, we have to go back to April 2007, when the Government proposed that from April 2008 there would be changes to the Capital Allowance system, making cars with CO2 emission ratings higher than 165g/km less appealing as company purchases than those rated below that level.

In this April’s Budget, that change was deferred to April 2009 – and the ‘break-point’ was tweaked further downwards to 160g/km.

Eye glazing stuff
At the risk of making your eyes glaze over, basically, the changes mean that the tax allowance a company can claim back from the Inland Revenue, each year, for a car it has purchased for an employee’s use, will be around twice as much (20%) for one emitting less than 160g/km than for a similar one emitting 161g/km or more.

As a very rough guide – depending on the residual value of the vehicle – the amount claimed back by a company over the customary three years’ life on the fleet compensates for the depreciation of the car.

The difference in ‘Writing Down Allowance’ for two £20,000 cars, one rated as emitting 161g/km of CO2 and another emitting 160g/km, could be several thousand pounds. That is just as significant to a company, over the whole-life-cost of a vehicle, as high VED or escalating fuel-costs.

Mark Sinclair, director of Alphabet Fleet services, said: “Although your average fleet decision-maker might be aware of capital allowances, they may not be aware of their cost impact. The person in the finance department completing the tax return calculates this – but are people calculating what the net effect of the changes will be?

“Fleets now have to consider the effects on contract hire rental. And, of course, they won’t be able to claim capital allowances as quickly as before so it also becomes a cash-flow issue. With 160gm/km-plus cars there will be a big differential between depreciation and what can be claimed as a tax allowance over the three or four-year period the car is with a fleet.

Wait for it
"Ultimately, you will get that allowance back – but it will take many, many more years.”

Sinclair wryly points out that this is good from the Government’s revenue-generating perspective. “It brings forward a lot of tax for them, whereas for companies it pushes back the benefit. The net effect of the tax changes has been to create this break-point at 160gm/km.”

Keith Allan, managing director of ALD Automotive, believes that the shake-up in Capital Allowances was the most significant measure of last April’s Budget. “It remains to be seen exactly what the impact of the changes will be, but it is clear that 160 g/km – the threshold at which the reduced writing down allowance kicks in – will become a company car choice-list benchmark for many companies,” he said.

“However, while businesses will undoubtedly encourage drivers to select low emission vehicles, it does not necessarily mean the so-called ‘gas-guzzler’ will not have a place on fleet choice lists.

Retention tool
“Company cars remain a hugely important employee recruitment and retention tool. The Capital Allowance changes, coupled with the tightening of benefit-in-kind tax and the impact of VED changes, make company car choice lists an increasing balancing act.”

Neal Francis, managing director of Pendragon’s corporate division, says fleets could be hit with mounting bills if they do not research vehicles thoroughly, understanding both the impact of the coming changes and the broader aspects of what the real whole-life-cost equation of running individual cars are.

“It’s the most fundamental change in the fleet industry for 14 years and yet few fleets understand it or are dealing with it,” said Francis. “The key now is to reduce costs, increase efficiency and decrease emissions. If companies don’t start insisting that employees have cars between 110g/km and 160 g/km they will find themselves significantly worse off in the tax year 2009/10.”

The two major fleet industry organisations, the British Vehicle Rental and Leasing Association and the Association of Car Fleet Operators, urge operators to review car policies now so that they are ready for the new tax regime. The new rules will apply to “all qualifying expenditure incurred on or after 1 April 2009”, not to cars already owned or leased, stress the organisations.

They also warn that perhaps after three or four years, vehicles within the current “expensive car” bracket may need to transfer into the new system. Report by Ken Rogers. 

Fleet training: Every little helps

Tesco is slashing its home deliveries fuel bill by a “minimum 10 per cent”, saving an estimated £1.2m a year, and similarly reducing its global warming carbon footprint – by ‘green’ driving. Experimental ‘black-box’ telematics, adding remote control to delivery vans, is pushing down fuel costs still further.

Now its 24-hour team of 7,000 ‘customer delivery assistants’ (drivers), in 2,200 vans covering around 60-million miles a year, are striving to achieve even better fuel economy, plus shrinking exhaust emissions.

And that is not all Tesco.com is gaining from ‘eco’ driving. The supermarket’s internet home shopping business, with an annual turnover of £1.3bn, says its:
* Vehicle reportable ‘incidents’ are down 20 per cent.
* Van damage is down 23 per cent.
* Crash rate is down 40 per cent.
* CO2 emissions are down 10-12 per cent.
 

Total current cash saving from these combined efforts to drive greener and safer is estimated at around £2.5m a year.
 Much of this achievement is down to Tesco.com’s driver training manager Andrew Kemp (no relation to the author of this article), who, among his many credentials, holds an  advanced driving instruction diploma and a first class honours degree in occupational road risk (ORR) management. Kemp, 45 (pictured) is also Tesco.com’s police liaison manager, representing the company in its dealings with police forces, VOSA, the Highways Agency, and Driving Standards Agency.

The 40-strong driver training team, based in Croydon, includes eight managers who form a crash investigation unit. Its purpose is to “learn lessons” from accidents as part of the driver training programme.

Meanwhile, ‘black box’ telematics technology is being introduced in a bid to improve van journey efficiency, and 15 electric vans are undergoing trial runs in London.

Andrew Kemp – who had previously been giving driver training to local authority employees and Kent ambulance crews – joined Tesco.com in 2005 on the recommendation of operations manager Cliff Cheeseman, who recognised the implications of ‘duty of care’ legislation on drivers.

Andrew stresses: “I’m very much part of a team in which every member contributes to its success. We are jointly proud of what has been achieved yet determined to do better. We have support from drivers in that they feel better valued.” Report by Michael Kemp.

‘Eco-driving not a one-off fix’

Safer, greener driving requires constant vigilance, warns the boss of Universal Driver Training, based in Camberley, Surrey. “Our research shows that between 60-70 per cent of employees who take advanced driver training retain safety and allied fuel economy skills for up to three years. Then they degrade back into bad habits, unless regular checks are made,” says Peter Jones.

“Training to achieve a high standard of eco-driving is not a one-off fix,” Jones added. “Employers need an incentive programme to encourage fuel economy and high attention to safety. They must keep up pressure on drivers, perhaps with something as simple as a meal out for two for those who meet quarterly mpg and incident-free targets.”