Fleet News

Fleets face taxation nightmare

COMPANY car tax could change four times within the next decade starting next April, Fleet NewsNet learned this week. The Government plans to use the tax system to reduce car use and accelerate the 'greening' of the nation's fleet, but it faces a delicate balancing act to ensure its fiscal changes do not reduce the UK's company car parc.

Failure to do so would result in the double whammy of losing the Treasury tax income and defeating environmental objectives by forcing fleet drivers out of newer, cleaner, and better maintained company vehicles into older, more polluting private cars. Members of the Government-established Cleaner Vehicles Task Force have revealed that middle and high mileage company car drivers could face increased tax bills from next April as the Government seeks to cut car use.

Sections of Whitehall remain convinced that many company car drivers clock up 'wasted miles' to qualify for the 2,500 and 18,000 business mileage tax breaks. This appears to have prompted the Government to use the tax system to reduce and then remove any incentive for company car drivers to make unnecessary business trips. Insiders believe that in 2001-2002, all company car drivers could face a flat rate tax charge based on 30% of the list price of their car, regardless of their business mileage.

This would effectively double the benefit charge for essential 18,000-plus business mileage drivers. April 2002 will see the launch of a carbon dioxide-based company car tax regime with tax rates starting at 15% of list price for the 'cleanest' cars rising to 35% for the 'dirtiest', with no business mileage discounts. Insiders believe the 2002 system could in turn be replaced within a few years by a new 'label system', taking into account a vehicle's wider environmental performance.

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