Are company cars "appreciated by all"?

I was intrigued by David Cameron's reference to company cars in an interview published in the Sunday Times. He was drawing an analogy between what the Government is doing and the methodical turnaround of a failing business. It was making a lot of sense to me.

Then about half way through he noted that:

"the next step for the spending review is to identify the spending I'd describe as "acceptable in the good times, unaffordable in the bad times". To continue the business analogy, employee benefits such as company cars might fall into that category. They are appreciated by all, but if you're suffering losses for the third quarter in a row, you've got to drop them."

In principle I can follow the logic although keeping employees onside is also crucial. Indeed the analogy breaks down as cutting the provision of company cars would actually represent a cut in the employment costs of the business. If the failing business cannot afford to remunerate its workforce it should not simply cut one element of the remuneration package.

My second concern with the PM's statement was how out of date is the sentiment behind it. I thought most employers had stopped providing company cars as a perk/benefit some years back.

It was 1994 when the basis for the tax charge was changed to focus on the list price of the car (and will often be set by reference to 35% of that figure). As the increased tax charges hit employees' pockets so company cars ceased to be an attractive employment 'benefit'. The system changed again in 2002 to focus on the CO2 emissions of the car. And these days few employees appreciate the provision of company cars as a perk, once they understand the associated tax charge - other than perhaps those employees with very low CO2 emission vehicles.

The benefit in kind charge for a company car is a set % of the 'list price' ranging from 10% for cars with emissions upto 120g/km, upto a maximum of 35% for cars with emissions of 230g/km. The relevant % will be applied to the full 'list price' including including all the manufacturer options and any other extras. Thus, as the vehicle cost increases so does the tax liability.

I'd be interested to know if many people still value the old company car perk. Please let me know.

In the meantime, you can find the the CO2 emissions for most cars using the SMMT website. Another useful site for finding out the changing tax charges on company cars is UK Carline.