FD's unaware of NIC and carbon link
20 April 2010
A new survey has found that a significant number of UK financial directors are not aware of the impact of company car CO2 emissions on the National Insurance contributions (NICs) that the company pays.
The research reveals that 29% of those surveyed who employ a fleet over 500 company vehicles do not know that firms could reduce their NICs by making simple adjustments to their fleet policy to introduce lower-emitting vehicles. Interestingly, this figure falls to 10% of respondents who manage a fleet of 21-40 vehicles.
In contrast, 33% of those surveyed felt that they could realistically reduce their fleet costs by between 6% and 10%. But without understanding the full impact of emissions on all aspects of business costs and how it can positively benefit the bottom line, this target looks unrealistic says Fleet Alliance.
Employer’s Class 1A NICs are calculated by multiplying the P11d list price of the vehicle by the benefit in kind tax percentage rates, which are derived from the vehicle’s CO2 emission levels.
The employer pays National Insurance Contributions on this amount at 12.8%. Vehicles that produce low CO2 emissions deliver less of a tax burden and hence lower employer class 1A NICs. And of course the employee benefits by paying lower BIK rates too.
NICs are a key element of a vehicle’s whole life costs, said Fleet Alliance managing director Martin Brown, and need to be factored into any calculation in deciding which are the most cost effective vehicles to add to the company fleet.
“Businesses should be looking at the whole life costs, including NICs, that are associated with adding new vehicles to their fleet, not just their upfront monthly leasing rentals or front end price. And there are significant savings to be made from adopting a whole life cost approach,” he said.
Factors such as the lease rental restriction, NIC costs and fuel can account for as much as 30-40% of a vehicle's cost envelope, he added.
“Other factors that need to be taken into consideration include the combination of the lease rental restriction and capital allowances, the funding method, CO2 emissions, residual values, fuel usage, length of term and size of fleet. Only then will the true cost picture appear,” he said.
However, for many fleet managers, a vehicle's monthly rental helps guide them in their leasing decisions. But, this snapshot, whilst quick and easy, is not an accurate method of assessing its true financial impact on the operation of a company fleet.
Price is clearly an important factor; but rental cost is only one of the many parameters that should be assessed as part of a fleet review and ongoing fleet management. To quote price in isolation could be, and almost always will be, misleading.
"If businesses are just looking at the list or rental price, then they are potentially not taking that 30-40% into the equation, and could be making the wrong choices for the wrong reasons," added Martin Brown.
20 April 2010
A new survey has found that a significant number of UK financial directors are not aware of the impact of company car CO2 emissions on the National Insurance contributions (NICs) that the company pays.
The research reveals that 29% of those surveyed who employ a fleet over 500 company vehicles do not know that firms could reduce their NICs by making simple adjustments to their fleet policy to introduce lower-emitting vehicles. Interestingly, this figure falls to 10% of respondents who manage a fleet of 21-40 vehicles.
In contrast, 33% of those surveyed felt that they could realistically reduce their fleet costs by between 6% and 10%. But without understanding the full impact of emissions on all aspects of business costs and how it can positively benefit the bottom line, this target looks unrealistic says Fleet Alliance.
Employer’s Class 1A NICs are calculated by multiplying the P11d list price of the vehicle by the benefit in kind tax percentage rates, which are derived from the vehicle’s CO2 emission levels.
The employer pays National Insurance Contributions on this amount at 12.8%. Vehicles that produce low CO2 emissions deliver less of a tax burden and hence lower employer class 1A NICs. And of course the employee benefits by paying lower BIK rates too.
NICs are a key element of a vehicle’s whole life costs, said Fleet Alliance managing director Martin Brown, and need to be factored into any calculation in deciding which are the most cost effective vehicles to add to the company fleet.
“Businesses should be looking at the whole life costs, including NICs, that are associated with adding new vehicles to their fleet, not just their upfront monthly leasing rentals or front end price. And there are significant savings to be made from adopting a whole life cost approach,” he said.
Factors such as the lease rental restriction, NIC costs and fuel can account for as much as 30-40% of a vehicle's cost envelope, he added.
“Other factors that need to be taken into consideration include the combination of the lease rental restriction and capital allowances, the funding method, CO2 emissions, residual values, fuel usage, length of term and size of fleet. Only then will the true cost picture appear,” he said.
However, for many fleet managers, a vehicle's monthly rental helps guide them in their leasing decisions. But, this snapshot, whilst quick and easy, is not an accurate method of assessing its true financial impact on the operation of a company fleet.
Price is clearly an important factor; but rental cost is only one of the many parameters that should be assessed as part of a fleet review and ongoing fleet management. To quote price in isolation could be, and almost always will be, misleading.
"If businesses are just looking at the list or rental price, then they are potentially not taking that 30-40% into the equation, and could be making the wrong choices for the wrong reasons," added Martin Brown.
Phone: 0845 601 8407 | Email: info@fleetalliance.co.uk | Legal information |
 |