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MONEY UP IN SMOKE?

Many Financial Directors have not made the connection between CO2 emissions and National Insurance contributions.  Proleasing Press Office explains in its latest press release.

A survey of UK Financial Directors highlights significant cost-savings for businesses that recognise the impact of vehicle CO₂ emissions on National Insurance contributions

The survey reveals that 29% of those surveyed that employ a fleet over 500 company vehicles, are not aware of the impact of CO₂ emissions on National Insurance contributions (NIC's). The figure falls to 10% of respondents who manage a fleet of 21-40 vehicles.

Employers can reap significant annual cost savings by making simple adjustments to fleet policy, by introducing a choice of lower emitting vehicles and highlighting the financial savings to the employee of choosing a greener vehicle.

In contrast, 33% of those surveyed felt that they could realistically reduce their fleet costs by between 6% and 10%. However, without understanding the full impact of emissions on all aspects of business costs, and how it can positively benefit the bottom line, this target looks unrealistic.

With the recent increase in emissions-based taxation, PROLEASING has seen a marked increase in the numbers of UK businesses of all sizes requesting advice and help in implementing and changing fleet policy to deliver cost savings and a greener fleet.

Class 1A NIC's are calculated by multiplying the P11d list price of the vehicle by the HMRC's benefit in kind tax percentage rates which are derived from the vehicle's CO₂ emission levels.  The employer pays National Insurance Contributions on this amount at 12.8%. Vehicles that produce low CO₂ emissions, deliver less of a tax burden and hence lower employer class 1A N.I. contributions.

The above illustration shows that by choosing a lower emitting vehicle, the Class 1A NIC payable by an employer is significantly reduced from £870 to £545 - a saving of £335 per annum. Multiply this figure by a fleet of 500 vehicles and the potential cost saving is £167,500 per annum.

Not only is this an incentive for employers to run lower emitting fleet vehicles, reduce their NIC's and present a greener image, but the cash savings can also be enjoyed by the employee who will pay less benefit in kind tax (BIK) on his or her company car. This BIK tax is calculated in a similar way, taking the list price and CO₂ emissions but then by instead of being multiplied by 12.8% it is multiplied by the employee's marginal rate of income tax.  The higher the CO₂ emissions, the greater the taxable amount and consequently BIK tax paid by the employee.

Commenting on the results of the survey, Nigel Stead, Managing Director of Lex Autolease said: "UK businesses are striving to cut costs, and companies operating fleets of vehicles have a number of opportunities to implement cost saving measures, provided they have the expertise and knowledge to introduce change. We're working with our customers to help draw out these opportunities, and implementing cost saving measures based on CO₂ emissions, not only delivers substantial annual cost savings to employers, but also the employee."