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Budget 2015: Implications for fleets and company car drivers

Budget 2015: Implications for fleets and company car drivers

George Osborne has been accused of discouraging the take-up of Ultra-Low Emission Vehicles following yesterday’s budget.

The Chancellor announced that company car drivers can expect a three percentage point year-on-year hike in their company car tax from 2019/20. And drivers of ULEVSs can expect the same, albeit the increase will be “more slowly than previously announced”.

Drivers of plug-in vehicles are already facing significant increases over the next four tax years following announcements made about company car tax rates in last year’s Budget, which essentially saw benefit-in-kind tax rates for ULEVs rising at a faster rate than those for higher emissions cars

This year’s Budget will now look to slow year-on-year company car tax increases on ULEVs, while increasing the year-on-year change for cars emitting more than 75g/km at a faster rate.

ULEVs are defined by the Government as models with CO2 emissions of 75g/km and below.

Andrew Hogsden, senior manager for Fleet Consultancy at Lex Autolease, said: “The announcement that BIK rates will rise by 3% in 2019 makes it even more important for businesses to identify vehicles with low CO2 emissions that are both fit for purpose and attractive to drivers. 

“They should also consider new and alternative technologies, which will become increasingly available by 2019, as well as best in class traditional fuels.” 

David Brennan, CEO of Nexus Vehicle Rental, added: “The news that company car tax will increase at a slower rate than planned is a welcome bonus to the businesses who rely on these vehicles to keep their operations running efficiently.”

The Chancellor also announced that the fuel duty increase planned for September 1, 2015 - due to be 0.54 pence per litre -  will also now be cancelled.

Matt Dyer, managing director of LeasePlan UK, said: “Drivers and fleet owners will be pleased to see that the Government has continued the freeze on fuel duty.

"Fuel costs remain a significant overhead for businesses and public sector bodies that operate vehicle fleets despite tumbling crude oil prices that have seen prices at the pumps fall to the lowest this decade.”

RAC chief engineer David Bizley added: “What we need now is a firm commitment from all political parties ahead of the election not to reverse his decision as soon as they take office as this would be a retrograde, harmful step that will lead to an increase in both household and business costs and dampen economic growth.”

Fleet decision-makers’ trade body ACFO voiced its disappointment about changes to company car tax announced in the Budget.

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.”

The trade body also believes it would 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.

Pryor added: “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.”

By the end of 2015-16, the Government will have eased the burden on drivers by £22.4 billion, a saving of around £675 for a typical motorist, £1,400 for a small business with a van, and £21,000 for a haulier.

According to Mr Osborne, by the end of 2015-16, the typical motorist will save £9 each time they fill their tank, compared to 2011. And he was keen to point out that by the end of the next financial year, fuel duty will have been frozen for five years, the longest freeze for more than two decades.

Howard Cox, founder of the FairFuelUK campaign, welcomed the fuel duty freeze, but asked: "Why doesn't the Government go further and drive the UK economy continually upwards by cutting duty?

“We give Mr Osborne six out of 10 for endeavour and will continue to campaign that duty should be frozen for the lifetime of the next Parliament with more pressure on a real cut in the Autumn Statement.”

It’s good news too for road hauliers. The Chancellor announced that the Government will review heavy goods vehicles (HGV) driving tests and driver medical assessments, promising to speed up the process in order to help address the shortage of qualified HGV drivers.

The Government also pledged to work in partnership with road haulage firms to find an industry-led solution to the driver shortage, including looking at the right level of access to, and funding support for, training.

Driverless cars were also on the Chancellor’s agenda, with a promised investment of £100 million earmarked for research and development into intelligent mobility and the systems required to implement and adopt the technology, such as telecommunications.

The Government is also promising transform the tax system over the next Parliament by introducing digital tax accounts, removing the need for annual tax returns.

By the end of the next Parliament, more than 50 million individuals and small businesses will be able to see and manage their tax affairs online.

‘Making Tax Easier’ sets out what this will mean for taxpayers. As a first step, the Government will publish a roadmap later this year setting out the policy and administrative changes needed to implement this reform, introduce digital tax accounts for all five million small businesses and the first 10 million individuals by early 2016, and abolish Class 2 NICs in the next Parliament and consult on reforming Class 4 NICs to include a contributory benefit test.

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