A NEW report indicates that the Government could undermine the environmental objectives of its new company car tax system by penalising high mileage drivers.

The Lex Vehicle Leasing 2001 Report on Company Motoring found that employees who opt out of company cars because of their tax fears will replace their cars with secondhand vehicles.

'As the age of the car correlates closely to the level of emissions, this would almost certainly be bad news environmentally,' said the report.

The new tax system risks being most detrimental to company car drivers who currently exceed 18,000 business miles a year and who today face a benefit charge of 15% of the P11D value of their cars.

These employees will have to select the lowest emission vehicles to maintain tax parity from next April, but even drivers with the most efficient, lowest emission diesel cars will face a three percentage point penalty, and as a result face a benefit charge of 18% of the P11D value. Lex Vehicle Leasing has proposed a tax concession for high mileage drivers that would give them a one percentage point discount for every 1,000 business miles they covered beyond 18,000 business miles, but maintaining the new system's minimum tax charge of 15% of P11D value.

But at the Fleet Show this year the Inland Revenue ruled out the proposal.

'We believe the system will penalise many company car drivers who have little choice but to use their cars for high business mileage. It is in these instances we plead with the Government to review the impact of the changes,' said the report.

It found that 64% of drivers who would by a car privately if they opted out of a company car would choose a used car.

  • The Lex Vehicle Leasing 2001 Report on Company Motoring is available free of charge via the Lex Website