Fleet NewsNet understands this will lead the Government to abandon proposals to penalise diesel cars under the new graduated vehicle excise duty, due to be introduced in autumn 2000, and under the new company car tax regime scheduled for April 2002. The Government is also expected to announce that so-called 'clean' diesels and hybrid vehicles such as gas/petrol and electric/ petrol-powered vehicles will be taxed on their carbon dioxide emissions, in exactly the same way as petrol-engined cars. The Government is expected to encourage ultra low sulphur diesel by widening its fuel duty differential with 'normal' diesel.
Details of the new benefit-in- kind tax system are due to be revealed in the March 2000 Budget, but the Inland Revenue has already confirmed that the taxable benefit will be based on a percentage of a car's list price, graduated by its CO2 emissions. This heavily favours diesel because of its significantly lower CO2 emissions, and led the Treasury to propose a 3% levy on diesels so that, for example, a diesel company car which should incur a taxable benefit of 20% of its list price because of its CO2 emissions would actually be taxed at 23%.
But it is understood that increasing pressure from vehicle manufacturers will lead the Government to signal its approval for cars featuring 'new' diesel technology such as common rail engines, while penalising 'old' diesel cars. The motor industry claims the only way the Government can achieve its CO2 reduction targets for the next decade is through a pro-diesel strategy, and new diesel technology is destined to play a key role in the European automotive industry's voluntary agreement to reduce the CO2 emissions of new cars to 140 g/km by 2008. The Inland Revenue has yet to determine the cut-off point between 'new' and 'old' diesels, but its plans appear to give fleets the go-ahead to purchase diesel vehicles powered by engines such as the PSA Group's HDi and Volkswagen's new 'pumpe duse' units without fears of a penalty.