From April, the threshold for the main rate of capital allowances for business cars reduces from 160g/km to 130g/km, while the threshold for claiming 100% first year capital allowances falls from cars emitting 110g/km to those emitting 95g/km. 

At the same time, the effects of a Benefit-in-Kind tax escalator kicks in, with a 1% increase this year, another 1% in 2014-15 and a  2% rise in both 2015-16 and 2016-17 – a total rise of 6% in four years.

Given these changes to the tax regime, Fleet Alliance believes that a fleet policy that includes hybrid is now one of the best options for fleets, because hybrids provide the greatest company car tax savings in the near term.

As an example, the company compared the new Toyota Auris Hybrid, which emits just 91g/km of CO2, with the latest Ford Focus diesel, which emits 99g/km, both with similar levels of P11D and specification, over a three-year period.

Toyota Auris Hybrid 1.8 VVT-i Excel CVT, CO2 91g/km

Ford Focus 5 Door 1.6 TDCi Titanium Econetic 115PS DPF, CO2: 99g/km

The Toyota hybrid cost less in tax on each of the three years as it did not attract the 3% diesel surcharge which the Focus did, while the Ford also climbed a tax band each year.

‘We believe hybrids have a growing role to play in near-term company car policy,’ said Fleet Alliance managing director, Martin Brown, ‘ at least while the 3% diesel supplement remains in place, providing drivers with conventionally sized company cars but minus the tax bill.’

‘We have been advising our clients of the need to make adjustments to their fleet policies in light of the forthcoming tax increases for some time, as well as looking at introducing a special “green” variant for each grade of the car policy, such as hybrids or low-carbon models,’ he added.

However, Brown said the picture changed considerably from 2016, when the Government has announced it will be removing the 3% diesel surcharge, thereby instantly making diesel cars more tax efficient.

‘But will the Government be content to lose revenue when this happens?’ said Brown. ‘It’s unlikely to give up one tax without imposing another. So we could see the introduction of a company car tax on other pollutants associated with diesel cars, such as Nitrous Oxides (NOx) and the sooty particulate matter (PMs) deposits.’

He concluded: ‘The tax changes we will see over the next three to four years mean that fleets need to carefully consider the right combination of factors that best meet their needs and act on them now.’

The Fleet Alliance White Paper is available at: http://www.fleetalliance.co.uk/whitepapers/default.asp