THE changes to company car tax due in April will throw up a number of options for employers and employees.o

Mark Bradbury, branch manager at HSBC Bank in Cornmarket, High Wycombe, told Business News about the pros and cons of one such option taking cash instead of a company car.

"Over two million cars are sold every year. Company fleets or businesses buy more than half of these, while 50 per cent of Britain's 1.7 million company car drivers travel in excess of 18,000 miles a year," he said.

"Meanwhile many thousands of drivers use their private cars for some form of business. Company cars also have a big impact on business costs after the payroll they are usually the next biggest source of costs.

"Subsequently a change to benefit-in-kind taxation in April 2002 is forcing businesses to re-evaluate the provision of this resource."

Under the new benefit-in-kind taxation scheme, said Mr Bradbury, cars will be assessed on the amount of carbon dioxide emitted and some company drivers may end up paying more tax. This affects most high-mileage drivers who presently qualify for the lowest rate of company car tax.

But perk drivers, where the car is provided as part of the remuneration package and who pay tax at 35 per cent of the car's value, may find the new tax rules more attractive.

Mr Bradbury said while there may be advantages in businesses offering cash in lieu of a company car, such as saving on class 1A national insurance contributions (11.9 per cent in 2001/2002) and allowing employees a personal choice from a wider range of cars, there are also drawbacks to both employers and staff.

These include for businesses the loss of a valuable recruitment tool and for employees having to source insurance cover for business use and obtaining credit to fund their own car.

To help in the decision-making process HSBC has produced a fact sheet Cash for Car an employer's guide available by calling HSBC vehicle finance on 08456 09 06 08.