Fleet News

Tax and emissions: The company car tax conundrum for ULEVs

by Matt Sutherland, chief operating officer at Alphabet

 

Over recent months the UK Government has restated their ambition that by 2050, nearly all cars and vans in the UK will be zero emission. Unfortunately, this target is set against a backdrop of declining tax and national insurance revenues, despite year-on-year increases in the tax burden for company car drivers.

This year’s Autumn Statement announced changes to salary sacrifice – with wider-ranging implications for organisations who offer ‘cash for car’ – in addition to big changes to Vehicle Excise Duty (VED) from April 2107. As a result of the changes there are justified concerns about ULEVs becoming less, rather than more, attractive for all company car drivers – at least until 2020.

A significant concern is that with the additional complications in company car taxation announced from April 2017, we could see organisations simply offering employees less choice for company car options, resulting in a big shift into ‘cash for car’ schemes. The consequences of which (according to BVRLA and Energy Saving Trust research) would be to increase existing grey fleet problems by putting older, more polluting, less reliable and less safe vehicles on UK roads.

In 2015, the Government introduced new ULEV-specific tax bands: a band for the cleanest ULEVs with emissions between 0 and 50 gCO2/km and a higher band for ULEVs with emissions between 51 and 75g CO2/km.

Industry experts though are questioning whether these tax changes are sufficient enough to encourage the wider adoption of ULEVs as company cars, particularly in the context of increasing BIK demands on drivers up to 2020. With ULEV P11D’s, in most cases, remaining higher than traditional ICE the ‘incentive gap’ between ULEVs and Internal Combustion Engine vehicles (ICE) is too small, effectively leaving EVs and ULEVs taxed out of fleet car choice lists. What’s more, the company car market has led ULEV adoption for the past few years, outstripping private ULEV registrations – so should we see a flight from company cars into cash over the next few years it is more than likely that these resulting ‘ grey fleet’ vehicles will not be ULEVs.

Ultimately we want to increase ULEV and PHEV adoption, as well as ensure that those driving them are using them correctly – both for the financial and environmental benefits. So the Government must consider the best mechanisms to drive real world ULEV adoption, as well as incentivising the right behaviours within the tax framework; providing a long term, coherent and understandable approach so businesses and drivers can plan their own strategies beyond the next vehicle change cycle.

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