THE Inland Revenue is asking fleets, companies and key figures in industry five key questions as part of a review of the carbon dioxide-based company car tax system.

Officials will be examining whether the system has reduced business mileage, as a result of scrapping the old system which gave drivers tax discounts if they covered high business mileage.

It will also examine the impact on carbon dioxide emissions and the type of fuel used and thirdly it will look at the rate of opting in or out of company cars.

A fourth area will be the compliance burden on employers, as the Government says it is committed to removing red tape and finally it will look at the impact on company car tax revenue, compared to original estimates.

Carolyn Mason, policy adviser at the Inland Revenue, said: 'Our objective is to be consistent, but incentivise greener cars, continue to incentivise manufacturers to produce cleaner cars and ensure these incentives are effective in reducing air pollution.'

This strategy will also be applied to alternative fuels as part of the current review of the Government's support for clean fuels including liquefied petroleum gas, biodiesel and hybrid cars. Mason said: 'My view is that it is important that if our tax treatment of vehicles favours one fuel over another, then there should be continued environmental benefits from using the fuel that justify that commitment.'

She also said the Government was committed to providing an early warning of any future changes to company car tax policy, so that fleets knew for three years the tax they would be paying on their company cars.

However, she said the same early warning commitment wasn't certain when examining the taxation of free fuel for private mileage.

Last month, industry figures warned that a delay in announcing the tax liability for receiving free fuel for private mileage could cost fleets millions of pounds.

But Mason said: 'Because that is a benefit and drivers have the choice to opt out of free fuel, which the Government is still trying to encourage with the new system, then we don't see the same reasons to provide early notice.'

Tony Leigh, conference chairman, commented: 'I would repeat on behalf of all fleet decision-makers that we need stability and notice when dealing with tax regimes.'