New research reveals that the April changes in the tax treatment of company cars has the potential to dramatically change the make-up of the UK’s fleet.

Eighty-one per-cent of fleet decision makers said the forthcoming corporation tax change would result in their drivers choosing more eco-friendly models.

The tax changes, which link the capital allowance rules for company cars with their carbon dioxide emissions rating, was discussed by fleet decision makers at a series of seminars run by vehicle management company LeasePlan in conjunction with KPMG.

Ninety-four per-cent of delegates felt that the Government was primarily looking to encourage fleets to be more environmentally friendly in their choices of vehicles, although 19% also felt it was simply another opportunity for the Government to generate more tax revenue.

Tim Hudson, commercial director at LeasePlan, said: “The April tax change is one of the biggest changes to affect fleets of company cars in recent years, but it follows a familiar pattern. The tax structure of the company car has been slowly amended in recent years in a number of areas to reflect the Government’s ‘green’ agenda. As a result, the UK’s company cars are amongst the most efficient on the road, and environmental issues are high on the agenda for any fleet manager.”

Savings of around 10% per car could be made every year through better management, according to a new report by GE Capital Solutions, Fleet Services.

Its ‘Car Policy Survey 2008’ examined 170,000 vehicles being run by 700 businesses across Europe and found that opportunities to cut costs existed in a wide range of areas.

Examples of the savings identified by the company’s Key Solutions fleet consultancy team included an annual average of £170 per car through better fuel management and an annual average of £220 per car by capping carbon dioxide emissions to reduce National Insurance, Vehicle Excise Duty and fuel costs.

John Kelly, Key Solutions leader, said: “A 10% saving for every vehicle represents a substantial reduction in fleet running costs - especially as the economic downturn is starting to really bite.

Fleet managers are being given more responsibility as the recession starts to take effect, according to the quarterly Company Car Trends survey by GE Capital Solutions, Fleet Services.

There has been a significant upward trend in the percentage able to make a final decision on choice of suppliers of goods and services, rising from 37% to 68.8% during the last year, as well as an increase in those who can have the final say over fleet policies - from 39.7% to 43.7%.

Gary Killeen, commercial leader at GE Capital Solutions, Fleet Services, explained: “Company Car Trends is supporting anecdotal feedback from the market showing that fleet managers are enjoying greater influence at the expense of HR departments, as cost, safety and ‘green’ concerns overtake the need to offer the best car possible in order to aid staff recruitment and retention.

“What is also striking about the latest research is the number of areas where these fleet managers can make relatively easy gains and have an immediate impact with their increased authority.”

The top five ‘easy win’ areas identified by GE Fleet Services in Company Car Trends, are: introducing fuel cards to manage costs, axing ‘expensive’ cash for car schemes, increase the use of internet management reports to improve cost control and fleet/administration efficiency, introduce solus or restricted company car policies, and use consultants to identify new ways in which operations can be made more efficient.

The recession could give a new lease of life to company cars as part of employees’ remuneration and benefit packages, according to the boss of Britain’s largest independent fleet management company.

The last decade has seen a surge in businesses providing cash alternatives to company cars for employees. As a result, the number of company cars on Britain’s roads has dropped to about 1.1 million - 500,000 fewer than when the emissions-based benefit-in-kind tax was introduced in 2002 - according to HM Revenue and Customs’ figures.

Many employees taking a cash option have used the money to fund a car through a personal leasing scheme. However, as a new study by motoring magazine Auto Express has revealed, nose-diving residual values are leaving many drivers facing negative equity on their vehicles.

Geoffrey Bray, chairman, of Fleet Support Group, which has around 55,000 vehicles under fleet management, said: “Companies are being irresponsible when expecting staff to take-up cash alternatives. Cash-for-car is nothing but financial engineering from the corporate viewpoint. Businesses that value their staff should not be encouraging the take-up of cash alternatives in the current economic climate.

“Employees who are coming to the end of a PCP-style contract are going to be in for a massive shock when they return their car and discover its value is massively below the sum they anticipated.

“As a result they will more than likely hand the car back and walk away and look to return to their employer’s company car scheme. Meanwhile, employers that have shelved their traditional company car schemes in favour of cash alternatives may want to reintroduce them. Employees, typically a company’s most valuable asset, will in the main be loath to risk the prospect of negative equity in the future.”