Company car tax continues to rise

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Chancellor George Osborne's budget has met widespread criticism within the fleet industry after the announcement of changes to company car tax rates.
Company Car Tax - ABAX

ACFO, the trade body for fleet decision makers, has voiced its disappointment about changes to company car tax announced in the Budget. From 2019, company car drivers will face a three percentage point hike in their company car tax.

Despite the increase to benefit in kind rates, the Chancellor's company car tax plans criticised by ACFO. The Government has indicated that the rates for ultra-low emission vehicles (ULEVs) will increase “more slowly than previously announced".

John Pryor, ACFO chairman, said: “The Government is ploughing hundreds of millions of pounds into encourage the uptake of zero and ultra low emission company cars so ACFO is disappointed that benefit-in-kind tax rates on these vehicles are increasing further in 2019-20.

“Given the government’s focus on encouraging demand for electric and plug-in cars through a range of incentives, notably grants, ACFO would have expected the chancellor to reduce company car benefit-in-kind tax rates, not increase them, on these vehicles."

ACFO believes that it would also potentially encourage company car drivers to turn to ULEVs if they paid benefit-in-kind tax on the P11D value of the vehicle after taking into account the plug-in-grant.

He continued: “Currently company car drivers receive no benefit from choosing a car that is subject to a plug-in-grant, which only benefits the vehicle owner.

“It is something that ACFO will continue to raise in its discussions with HM Treasury and HM Revenue and Customs.

“Furthermore, ACFO is also disappointed that the Budget did not clarify mileage reimbursement rates for electric and plug-in vehicles.

“Once again, it is an issue that ACFO has frequently raised in discussions with civil servants and will continue to do so."

Extra £340m raised through tax increase

BVRLA director of policy & membership Jay Parmar said: “We’re encouraged that the Government has responded to our calls to reduce the pace of company car tax increases on ultra low-emission vehicles in 2019-20. Sadly, George Osborne has chosen not to go further, and the Government now runs the serious risk of reducing the tax incentive between ultra low-emission vehicles and higher-polluting models."

Company car tax will see a rise by 2 percentage points for cars emitting more than 75g/km to a maximum of 37% until 2018-19 after which there will be rise of 3 percentage points for 2019-20. In 2017-18 there will be a 4 percentage point differential between the 0-50 and 51-75g/km bands and between the 51-75 and 76-94g/km bands. In 2018-19 this differential will reduce to 3 percentage points.

Parmar commented “This is likely to cost the industry an extra £340m in 2019-20, according to Government estimates, which is a 171% tax rise compared to what the industry was expecting from the 2014 Budget. We’re disappointed the Government is accelerating the rate of increase in company car tax that thousands of motorists will pay, at the same time as putting the brakes on the take-up of ultra low-emission cars.“

Does the steep rise in tax reflect advances in vehicle technology?

The chancellor has it clear that in order to keep tax payments low, fleets will need to be running vehicles in the sub 75g/co2, if not the sub 50g/co2 bracket. But in just 4 years, it is likely that manufacturers will be producing engines capable of running this efficiently. Given that it has only been a few years since viable options for company cars have been available with 99g/km or less, it seems like a big ask.

Only time will tell!

/ Chris Miller