As British businesses go green the UK's bosses are set to slash company car fleets.

A survey investigating the impact of government changes to company car tax rules, which come into force next spring, finds that nearly half the country's employers will cut their fleets and switch to more environmentally friendly vehicles.

But the study by the Institute of Directors and chartered accountants and business advisers HLB Kidsons reveals that many smaller companies will be hit by increased costs and will switch to cars privately owned by employees.

IoD policy deputy, Richard Baron, warned that company cars were often vital to business.

"The government's aim was to discourage the use of perk and unnecessarily large cars, but it should take note of the fact that 70 per cent of company cars are considered to be necessary for business use, and not just perks," he said.

Of the measures introduced with the intention of impacting on the size and cost of operating a company car fleet, changes in car and fuel benefits in kind (BIK) are likely to have the greatest impact, finds the study. Over half of the respondents say that changes in car BIK will have a "big impact" on the operation of their fleet and fuel benefits for employees.

The IoD warns that proposals to tighten up on the C02 emissions have been greeted with dismay by many small and medium sized companies (SMEs).

"For many SMEs the new tax regime will mean extra red tape as around half of respondents see this as adding yet further to their administrative burden," Richard Burden said.