With 19 countries across Europe now using CO2 emissions for the basis of their car taxation in some shape or form, it is clear that in order to contain or reduce overall costs, fleets will have to sit up and take notice.

Those who pursue car policies that respect this fact, will have a good chance of avoiding some of the taxation traps that exist within certain country tax legislation, where thresholds lurk to catch out the ill-informed, enforcing penalties in registration taxes, operational taxes, corporate taxes and social security contributions.

It’s not all bad news though, for the most part, for every penalty there is a corresponding reward for those who choose lower carbon vehicles. Real bottom-line savings await those who dare to push back the boundaries and position themselves ‘ahead of the curve’ in CO2 terms.

It is important to consider the total cost of ownership, including all of the tax positions when making your decisions on fleet; the cost of fueling and taxation is the biggest portion of the total cost when combined, so it is folly not to do so.  The challenge, when you run a European fleet, is to keep abreast of all of the changes in all of the markets; the information is out there but finding, digesting, developing policy and acting on it is another matter. Specialist help is at hand if you would like to contact us to discuss your specific fleet challenges.

The European Court of Justice (CJEU) has ruled that in some circumstances, benefits being offered in exchange for a salary sacrifice, will attract VAT as they are deemed a ‘supply of services’. Salary Sacrifice based company car schemes could in some cases, fall foul of this ruling, making employees liable for VAT on the benefit.

HMRC have issued some guidelines on the ruling. To go to the HMRC Briefing click this link.

The general feeling is that most salary sacrifice schemes, if structured correctly, should avoid the attraction of output VAT, however it is clear that professional, specialist guidance should be sought if you have a scheme in place and it has not been cleared by a qualified tax professional or if you are considering introducing such a scheme in the future.

Contact us if you have any concerns.

Alphabet, the leasing company owned by BMW, has acquired ING Car Lease, taking it’s footprint across Europe from 14 to 16 countries.

Started in the UK in 1997, Alphabet has experienced steady, but mainly organic, growth since then. The acquisition of ING Car Lease will provide a unprecedented growth for Alphabet, taking it into the ‘Top 3′ by volume in the UK leasing market at just shy of 100,000 vehicles.  Across Europe, the total fleet increase will be in excess of 60%, with more than 500,000 vehicles being under management of the combined business.

The deal is due to be completed before the year end, subject to the usual due diligence and regulatory approvals.

We would expect there to be a full consolidation of activities in the medium to long term, with the Alphabet business model being pursued in the main, although ING has a number of effective products and services, along with very capable staff, who will undoubtedly be, in part, transitioned across.

This can only serve to make Alphabet a stronger European business with greater leverage and a broader skills base in the European fleet competitive world.

Lease companies, eager to maximise profits in competitive EMEA market, are using contract variations as a means to provide incremental income, recent tender activity has found.

Large differentials around ‘excess’ and ‘credit’ mileage rates applied, effectively means that lease companies can profit through ‘mileage pooling’ and ‘re-contracting’ activity, leaving their customers to pick up the bill.

Accepting the fact that there is a depreciation ‘curve’ involved in the process and there is a natural differential that needs to be applied to excess and under mileage situations, the premium that lease companies charge for ‘excesses’ is disproportionately large, we have found.

Recognising this and how it will affect your fleet costs is not straightforward, requires a detailed understanding of the application of the commercial terms and is usually buried in the small-print of lease agreement, so we urge extreme caution when approaching so-called ‘open-view’ agreements – you could be paying for years to come.

With the announcement that ING Car Lease is to be sold by it’s parent ING Commercial Banking, if a suitable buyer can be found, there is further concern over the potential reduction in competition that this could bring for EMEA fleets.

A strong player in the lowland markets with a presence across Europe, the most likely scenario is that the business will be sold as a whole to one of it’s current European fleet competitors.  If this happens, it will further reduce the choice for those businesses looking to establish a single lessor in Europe.

There is a chance that a supplier with presence in complimentary markets may view this as an opportunity to become a more robust Pan-European supplier, although the number of businesses fitting this description are few and far between. With funding for independent businesses in short supply, buying ING Car Lease could be a very difficult task in any case.  More likely, one of the current ‘Big Four’ in Europe, will take this as an opportunity to ‘build the book’, and swallow up the business into their own.

We will watch this with interest and it would be great for our customers to have a new player with a wide presence in Europe, but I somehow doubt whether this will happen with ING Car Lease.

Fleets across the EMEA region are feeling the pain of fuel price increases, which amount to an average of 18.4%* over the last 12 months. What many businesses don’t realise however, is that by reducing the carbon output of their fleet, they can combat the rising price of fuel.

For those businesses who have taken the decision to reduce the CO2 that their fleets output, the price increases can be partly offset by the improved fuel efficiency of the cars on the fleet.

Fleetworx has calculated that for a car traveling 20,000 miles (30,000km) per annum, where fuel is fully expensed, a company can save on average €1.31 per gram of CO2 per month.  When spread across a fleet of 1000, this is nearly €160,000 per annum for every 10 grams of improved CO2 performance.

*Source The AA

Following recent tendering activity by Fleetworx, in the International Fleet arena, it is clear that Europe’s biggest fleet players are all making active moves to support businesses with cross border fleets.
We have seen a polorisation of resource and effort by the major players.
All now offer dedicated resource for the exploration and implementation of pan-EMEA fleet solutions. For most lean operating businesses with streamlined core functions, this has been necessary for some years, but sadly lacking in some sectors of the market place.

With the banks now operating from a stronger base, the appetite for business is returning to their leasing arms, creating a much more competitive environment for those who know what to look for.  Although still a major concern, tendering for new suppliers across EMEA is now a much more rewarding activity for those wanting to deliver fleet savings.

A recent report carried out by GE Capital concludes that rising fuel costs will continue to race up the fleet TCO (total cost of ownership) stakes. The study found that nearly a third of fleet managers believed rising fuel costs to be of maximum concern. However, the somewhat worrying statistic is that fleet managers can see this trend continuing as 47% of respondents believe they would rate fuel costs as a maximum concern when asked in a year’s time. The findings were as follows (Scored out of 10):

Considering that normal unleaded fuel prices have risen from  an average of 121.5 PPL (pence per litre) in May 2010 to 136.9 PPL in May 2010 – a rise of 15.4 PPL*, the fleet managers pessimism appears to be correctly placed.
Clearly fleet managers cannot influence ‘at the pump prices’, however there are several strategies that organisations can undertake to manage fuel prices.  According to Gary Killeen, UK Fleet Commercial Director, GE Capital: “We expect to see a lot more interest in formalising these actions into comprehensive fuel management policies during 2011”
* Source: AA.

The European Commission has just presented a proposal document involving carbon tax. This would be based both on the energy content and on the emissions of CO2 of fuels. The Commission believes that this move would correct an imbalance which currently exists. The quantity of CO2 emitted would be taxed, but account taken of the amount of energy actually produced by the fuel in question. A minimum monetary level is proposed, in order to avoid wide variations which exist due to different states having different tax levels. The variable part of the tax, based on CO2 output, could lead to diesel, for example, being taxed at around 8% higher than petrol. An Emissions Trading Scheme is also envisaged, as is the possibility of granting a transition period to industries which are traditionally heavy users of diesel. A minimum level of 20 Euros per tonne of CO2 could be in force in 2013.

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Fleet Europe

In a Research report published by Ricardo and National Grid, the market potential is demonstrated for an electric plug-in vehicle fleet of the future to provide balancing services to the power grid on a commercial basis, returning value to vehicle owners while improving the carbon efficiency of grid operation

The report – Bucks for balancing: can plug-in vehicles of the future extract cash – and carbon – from the power grid? – is based on a research collaboration between a team of engineers from Ricardo and National Grid, the operator of the high voltage electricity transmission system within Great Britain (GB).

Key findings of the research include:

• Using demand side management alone, the projected fleet of plug-in electric vehicles in 2020 would be able to provide an average of 6 percent of daily GB network balancing service requirements. This rises to a maximum of 10 percent in the evening and overnight.
• Demand side management would provide a modest annual financial return to the individual vehicle owner of approximately £50 for zero investment (effectively the equivalent of an 18 percent saving on recharging costs).
• Vehicle-To-Grid (V2G) based grid balancing was shown to provide significantly greater revenue on an individual vehicle basis – ranging from approximately £600 per year for a 3 kW system to in the region of £8000 per year for a 50 kW three phase installation. However the very significant capital cost of a vehicle based bi-directional power interface and the balancing market size limitations that would restrict the value of the service if implemented fleet wide, would serve to render the fleet scale roll-out of the V2G balancing service uneconomic.
• V2G operation may however be attractive for owners of captive vehicle fleets such as industrial or local delivery vehicles, battery exchange depots or aggregated batches of life expired vehicle batteries, where interface costs might be shared across multiple vehicles or battery packs.
• With the increased requirement for grid balancing services arising from the changing dynamics of the generation mix, plug in vehicles could be made to work in synergy with the electricity market to help balance supply and demand, so reducing the reliance on ‘conventional’ generation for the provision of these services; hence this has the potential to reduce CO2 emissions.

Commenting on the publication of the report, Mike Edgar, strategy development manager, National Grid, said: “National Grid is pleased to have been able to support this research project through the provision of data and technical and commercial information regarding the GB grid and its current and future balancing service requirements. This report will bring into focus a potential opportunity for the electric vehicle sector which, as it matures, may lead to a position where the balancing service contribution it can provide is both commercially viable and practical.”

Ricardo chief technology and innovation officer Prof. Neville Jackson added: “Ricardo strongly believes that the energy storage capacity of a future electric vehicle fleet needs to be viewed as an integral part of the power system. If operational synergies at both a grid and distribution network scale are exploited, some of the obstacles to the mass roll-out of electric vehicles will be tackled and the associated costs of necessary power system reinforcements and upgrades will be minimized. The battery will represent a substantial part of the capital cost of an Electric Vehicle for the foreseeable future and working this asset to realise further value could be important in providing a competitive product to consumers.

“This joint study by Ricardo and National Grid has served to provide genuinely new insights into the potential for the large-scale aggregation of plug-in vehicles to provide grid balancing services. By evaluating the financial benefits and costs of participation in such services, the research team has provided highly useful data that will be of considerable use to the automotive and power industries as they seek to maximize the potential of the future electrification of road transport.”