MORE than a fifth of the UK's three million company car drivers will ask for a pay rise to cover anticipated increases in their benefit-in-kind tax bills next April, according to a report published yesterday.

The Lex Vehicle Leasing 2001 Report on Company Motoring surveyed 381 fleet decision-makers and 300 company car drivers, and found that 22% of drivers will ask for a higher salary to compensate for increased company car tax bills.

But the report also forecasts that the new carbon dioxide-based tax system will lead 600,000 new employees to accept a company car while 200,000 current drivers hand in their company car keys.

'The net effect of company car taxation changes could be 400,000 new company car drivers,' said the report.

This is double the increase forecast by the Inland Revenue, and comes on the back of evidence of much greater awareness of the new emissions-based company car tax among drivers and fleet managers.

The report found that over three-quarters of drivers (77%) are now aware of the CO2 tax changes, compared to 38% in 1999. Indeed, 57% of drivers now either support or are ambivalent about the new company car tax system, and only 20% of drivers expect to pay a lot more in tax.

'Non-essential users who had previously opted out of company cars (due to the tax penalties) may opt in,' said the report. Fleet decision makers expect only 7.1% of drivers to opt out of their company cars because of the tax changes, a figure that tallies with the report's finding that 82% of drivers now consider their company car to be essential to their jobs.

In 1993 just 69% of drivers viewed their cars as essential business tools, indicating that many of the other 31% have already opted out. This year drivers said they are only likely to opt out of a company car when it is no longer essential to their job, or where their tax bill rose by more than 20%.

As a result, 82% of drivers said they were either likely, very likely or certain still to have a company car after April 2002, although to mitigate potential tax increases, 40% plan to select a company car with a smaller engine and lower emissions, compared to 15% in 1999.

A further 32% will switch to a different fuel type - an indication that fleet appetite for diesel-powered cars will rise in the light of the fuel's significantly lower CO2 emissions.

  • Click here for more findings from the Lex Report.