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Tax rates clarity is welcome, but Government must not stop there

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By Matthew Walters, head of consultancy and customer data services at LeasePlan UK

Finally, the Government’s long-awaited response to the review of the Worldwide harmonised Light vehicles Test Procedure (WLTP) and vehicle taxes has been announced. It’s certainly welcome news for many, demonstrating ministers’ commitment to lower taxes for low emission vehicles.

Whilst some may feel it doesn’t go far enough, this is a milestone moment for the industry. Certain company cars will pay no tax at all, following the announcement that zero emission vehicles, along with hybrids that have an all-electric range of 130 miles, will have their taxes scrapped. Not only that, we now have clarity on the tax years of 2021/22 and 2022/33, as well as the notable reduced rate at which the increase will occur: 1% per annum.

We’re starting to see real reform when it comes to the prioritisation of EVs and this announcement shows the important role company car drivers play in reducing emissions. With the increasing prevalence of other measures being introduced to encourage greener motoring, coupled with impressive miles-per-charge, growing infrastructure and the associated cost savings of switching to electric, implementing EVs into a fleet is starting to look like a viable option for many. So it’s encouraging to read that following a Fleet News poll, as many as one in five drivers were considering an EV as their next company car.

Whilst the Government is taking action, we’re still going to see higher CO2 figures on traditional fuels as we move to WLTP. It’s essential that businesses work with their fleet providers to understand not just the costs involved, but the future fleet make-up and strategy – which will undoubtedly mean exploring low emission vehicles.

The recent tax changes, as well as the growing number of CAZs, are designed to encourage drivers to adopt greener vehicles. But at LeasePlan, we’re seeing demand for EVs currently outweigh supply by about 4:1. Granted, in the last few years manufacturers have produced more electric vehicles, but there still aren’t enough to meet demand.

The Government could take inspiration from other countries, such as the Netherlands, who registered the highest EV share in the EU last year. The tax incentives offered to manufacturers to supply EVs is clearly working – our Government must incentivise, in some way, the supply of EVs in the UK to meet demand.

It’s true that the traditional company car model is changing. However, as Mobility-as-a-Service (MaaS) increases in popularity, new types of individual-focused solutions will become available, making cars easier to access. It’s therefore imperative that leasing providers expand their range of services to adapt to changing behaviours towards vehicle ownership. Ultimately, there will still be a need for company cars, but drivers will have more options available to them to suit individual requirements.

The industry is changing, and fast, so fleet managers must adapt. For example, businesses have always grouped employees into grades to determine which level of vehicle they’re entitled to; businesses now need to group drivers based on their driving behaviour, e.g. motorway driving versus city driving.

Finally, the Government has made its decision regarding WLTP and the current company car tax rates. There are now other areas that require review. For example, the complex issue of leasing disallowance.

We’d now urge the Government to take an in-depth view and look at abolishing special rate pools, or even go as far as resetting the CO2 level to 130g/km (from 110g/km), to recognise the impact of WLTP.  This could go a long way in easing the burden on businesses and drivers.

Read how a company car's registration date could cost drivers dear

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