We have always known that the chancellor would continue with the tax based carrot and stick approach to influence both company car drivers and their employers to choose cars with low emissions. While the 2012 Budget certainly gave clarity to 2017, it was not the news many had hoped for.
Over the last few years the capital allowances position of cars that emit over 160 g/km of CO2 has gradually moved them out of company car choice lists. From April 2013 160 g/km becomes 130 g/km which logically means that many of todays more popular vehicles will go the same way. Some manufacturers already have a model range with many cars achieving the 130g/km number, for others the position is not so rosy. Add to this the new 8% CA rate from April 2012 and this group of cars will become even more expensive to provide.
Further increasing the pain for this group of cars is that the 15% lease rental restriction, which will now apply to cars with CO2 emissions exceeding 130 g/km from April 2013. Unlike Capital Allowances this is not a timing issues, the 15% restriction is permanent.
However over the last few years we have seen clients already adopt emission ceilings in of 130 or even 120 g/km as they realized that generally the lower the emission the better value for all concerned, we predict this trend to continue as smart employers will always look forward.
At the other end of the scale from April 2013, the Government will extend the 100 per cent FYA for businesses purchasing low emissions?cars for a further two years (to 31 March 2015). However, the CO2 emission threshold at which cars become eligible for FYA’s is being reduced from 110 grams/kilometer (g/km) to 95 g/km. Many cars still fall into this worthwhile bracket, but lots fall outside. With 100% being such a great incentive it is imperative that companies re evaluate the effect this will have on whole life costs, and therefore rethink their car choice lists.
With Leasing companies no longer eligible for 100% FYA will this make purchase based funding more attractive for some companies? Will we see some new creative products entering the market?
This budget is certainly not signaling the end of the company car, It is a clear message saying to all concerned “don’t get complacent, you must continue to think low emissions if you want value for money” .
As we have said for many years’ businesses must bring tax into their whole life cost and funding calculations! Buying on list price or rental is simply no longer the sensible thing to do.