Fleet Alliance draws up wish-list ahead of Budget

Fleet Alliance draws up wish-list ahead of Budget

Posted by

Kevin Blackmore

October 2018

Fleet Alliance has drawn up its wish-list ahead of the 2018 Budget Statement later this month, asking for greater clarity in future taxation plans, improved incentives for electric vehicles and assurance that company car drivers are not disadvantaged by new emissions rules.

Chancellor Philip Hammond will present his Autumn Statement on Monday, October 29, breaking further with tradition, and will “set out the government’s plan to build a stronger, more prosperous economy”, following on from the recent Spring Statement and last year’s Budget.

However, the picture regarding company car tax remains a confused one, and Fleet Alliance is calling on the Chancellor to deliver far greater transparency in a number of key areas that affect the fleet market.

1. New WLTP testing regime

The new Worldwide harmonised Light vehicle Test Procedure (WLTP) could increase the tax bills of some company car drivers, through no fault of their own unless – as hoped – the Government sees sense and adjusts BIK levels accordingly.

The new WLTP regulations relate to all new cars registered after September 1, and from that date only WLTP-type approved cars can be sold in the European Union, including the UK.

The new regulations are intended to give a real-world account of the car’s exhaust emissions in realistic conditions. However, the transition from the old NEDC (New European Driving Cycle) regime to WLTP has not been without problems.

Manufacturers are currently able to quote WLTP emissions values correlated to the previous NEDC testing system, before they must switch solely to WLTP values from April 2020.

However, many experts have identified a general increase in CO2 emissions under the NEDC-correlated WLTP values when comparing the old regime to the new, which could increase BIK tax bills.

“We would like to see a commitment from the Chancellor that no company car drivers will be disadvantaged financially from the introduction of the new WLTP system – which should be about recording more accurate carbon emissions rather than raising revenue,” said managing director, Martin Brown.

2. Tax treatment of electric vehicles

It is in the electric vehicle (EV) market that the Government’s current tax proposals seem most confused.

Under its current plans, the Benefit-in-Kind (BIK) rate for electric company cars is set to soar to 16% next April, before dropping to 2% in April 2020.

This has served to actively dis-incentivise the take-up of EVs, contrary to the Government’s own ambition to encourage their take-up, as set out in its Road to Zero environmental strategy.

By bringing forward the 2% BIK rate for zero emission vehicles, Fleet Alliance believes the Government could provide a much-needed stimulus to the EV market, which is currently growing at less than 4% per year.

“We have a system in place from April 2020 to incentivise drivers to select EVs by bringing in a new 2% BIK rate for the least polluting models. It makes no sense to have a 12 month moratorium in which the tax rate for EVs actually rises to 16%, before the new lower rate comes in.

“Our plea to the Chancellor is to scrap the anomalous tax plans for next year and introduce the new BIK rates for EVs from this coming April. That way, sales of EV may receive the boost they so desperately need,” said Martin Brown.

3. Diesel tax surcharge

The Government’s message regarding the future of diesel is a confused one that has all but wrecked the diesel market in the UK, causing manufacturers’ to introduce short-working, cut back production and lay off workers.

And yet the newest generation of Euro 6 diesels are, thanks to advances in engine technology, the cleanest ever built, with low levels of nitrous oxide and carbon dioxide.

However, rather than incentivising these new, cleaner diesels and utilising them as a stepping stone to a zero emission future, the Government actually increased the tax surcharge on diesel cars from 3% to 4% from April this year.

As a result, according to official estimates, more than 800,000 drivers of diesel company cars, including the latest Euro 6 models, are set to pay out an extra £70 million in diesel company car tax in the current tax year.

“The current generation of clean diesels are ideal for many businesses. They are economical to run, travel long distances and are low polluters. They could be used to bridge the gap between the current ICE generation and the power trains of the future. However, the Government has increased their taxation and signalled an end to carbon-engined vehicles by 2040. As a result, the bottom has fallen out of the new diesel market.

“We believe that Euro 6 diesels should be positively incentivised by this Government by the removal of the 4% diesel surcharge completely. Companies would then know where they stood in terms of powertrain policy for the next decade and could plan for the future with confidence,” said Martin Brown.

4. Fuel duty

Prices at the nation’s fuel pumps seem to rise inexorably and, according to the AA, are now at a three year high – although wholesale prices appear to be falling.

The AA says that the average UK petrol price is currently 130.6p per litre, while diesel is 134.5p. And in the past 12 months, average petrol prices have gone up by 11.5p a litre, with diesel up by 14p a litre.

A freeze on duty, therefore, would seem to be welcome by most, and Prime Minster Theresa May actually stole the Chancellor’s thunder at the recent Conservative Party Conference when she announced that duty, which is expected to generate £28.2bn in income for the Government in 2018-19, would be frozen for the ninth year in a row.

“We welcome Mrs May’s announcement,” said Martin Brown,” as it helps businesses to run their vehicle fleet more efficiently. However, we would like to see a closer correlation between wholesale prices and prices at the pumps so that drivers actually see the real benefit.”

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