The number of employees paying company car tax has increased for the first time in 10 years, newly-released figures suggest.

The data, from HM Revenue and Customs (HMRC), shows that 950,000 employees paid benefit-in-kind (BIK) tax on a company car in 2014/15 – a 1% rise on the 940,000 recorded in the previous financial year.

It is the first time the number of people paying BIK on company cars has increased since 2006/07, when the number hit 1.16 million.

The 2014/15 increase puts the number of company car drivers on a par with that last seen in 2011/12, when the combination of benefit-in-kind (BIK) tax and NICs was worth £1.66 billion to the Treasury.

Three years later and the same number of company cars were worth an additional £240 million in tax to the Government at £1.9bn – a 15% increase.

It means a company car was worth, on average, £2,000 to the Treasury in 2014/15, compared with £1,747 in 2011/12. 

Figures also show company car drivers have paid the lion’s share of the increase, some £150m more compared to the £90m extra paid by employers.

The higher tax take can, in part, be explained by the increase reported in the taxable value over the same period. In 2014/15, the ‘value’ of the company car parc was reported as £3.95bn, which was £290m (7.9%) more than the £3.66bn recorded in 2011/12.   

Colin Tourick, professor of automotive management at the University of Buckingham business school, told Fleet News: “The economy had been doing well in 2014/15 so we can be fairly sure that more employers were employing more staff, and were offering company cars.

“By 2014/15, we also had some very good low-CO2 new cars available in the market, so employees were able to opt for company cars without having an exorbitant company car tax bill.”

In addition, Tourick says that companies have become much more aware of duty of care issues, and realised that in order “to maximise health and safety compliance”, they were better off offering company cars rather than cash allowances. “This definitely moved some companies to reintroduce company cars,” he said.

“It’s not possible to know how much each of these elements would have affected the overall number of company cars, but the small increase in the total company car parc is a welcome development.”

The Society of Motor Manufacturers and Traders (SMMT), reported around 1.4 million cars were registered to fleet and business in 2015.

With a typical annual new car market of 2m, fleet accounts for just over half, but of those 1m-plus new cars, around 220,000 go to Motability. A further 230,000 are daily rental, while captives account for around 70,000.

‘True fleet’ accounts for the rest, generally between 650,000 and 700,000. These are believed to be genuine, new company car registrations, although true fleet also includes cars registered as courtesy cars to bodyshops – estimated at around 45,000 vehicles.

However, annual true fleet registrations of 600,000 would suggest a fleet of some 1.8m company cars based on a three-year cycle, or 2.4m cars on a four-year cycle.

Both are considerably higher than HMRC’s figure of 950,000 company cars, which will be down to the remaining cars being used purely for business, with no private use, which would negate BIK payment.

Either way, it remains to be seen if the upward trend will continue in 2015/16, when the data is released by HMRC next year, and what effect, if any, Brexit will have.

Tourick concluded: “I suspect that the 2015/16 figures will show a similar small increase, but that the number will decline again in 2016/17 as part of the general fallout as a result of the Brexit referendum.”

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