Funding is bespoke to individual organisations and while tax changes can trigger a switch in funding routes so can alterations in an organisation’s status and attitude.
These include, for example, its ability to borrow money and its own cash situation, its attitude to financial risk and its level of internal fleet expertise, as well as changes in its VAT or corporation tax position.
For many years, the marketplace split between organisations choosing to lease or purchase their fleet cars outright has been approximately 65% to 35%, but within that split there is flexibility for change.
Since 1 April 2013, the 100% writing down allowance threshold for company cars has been set at 95g/km and below.
We are aware of a number of fleets that historically opted for contract hire company cars but have moved to outright purchase or contract purchase for cars that fall into the 95g/km-and-below sector. This allows them to benefit from the advantageous tax position, because leasing companies are unable to claim 100% first-year writing down allowance on cars with emissions of 95g/km and below.
We are also waiting to see the outcome of the long-running debate on the International Accounting Standards Board’s proposals to bring all leased assets onto a company’s balance sheet.
The idea was originally to force organisations to include big-ticket items, such as buildings and oil tankers, on their balance sheets, and although it remains a nonsense that small-ticket items such as cars and vans are caught up in the proposals, organisations must be mindful of the potential for change.
Although no date for any accounting changes has been announced, some businesses will be concerned that including contract hire cars on their balance sheets will impact on their gearing and ability to borrow money.
John Pryor is chairman of the Association of Car Fleet Operators (ACFO).