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In 2002, the Government made radical changes to the assessment of  benefit in kind on company cars for income tax purposes. This lead to very substantial increases in taxation for senior employees who enjoyed the status of a larger car.

A report by performance development company Mitac suggested several possible outcomes to the proposed changes. These included demands from employees for an increase in salary to cover the cost of the additional tax, and/or a reduction in the size of vehicle offered to company car drivers.

This prediction was fulfilled even before the legislation had taken effect.

Employers began to consider how to deal with requests for salary increases to compensate for the taxation, and whether a smaller company car would be seen by a senior executive as a ‘cut’ in his remuneration package.

One possible solution is an economical saloon for day-to-day high mileage use, plus a fully maintained classic car for leisure and occasional business trips.

The executive’s position in the company would be fully acknowledged and his tax bill would probably be lower than it was before.