Fleet News

Government threatens Budget increases for company car tax

THE Government has issued thinly-veiled threats that Chancellor of the Exchequer Gordon Brown is planning to increase company car tax in his March Budget. Leaks from key Government ministers during the last week have indicated the Treasury is looking to scrap business mileage tax breaks.

These breaks offer company car drivers a one third reduction in benefit-in-kind tax if they drive more than 2,500 miles on business in a year, and a two thirds reduction if they exceed 18,000 business miles. Government ministers believe this incentivises company car drivers to cover unnecessary miles in order to qualify for the tax break thresholds. John Reid, Minister for Transport, said: 'The main problem with company car taxation is that, at a certain level, there is an incentive to drive more business miles to pay less tax. The matter has been, and continues to be, reviewed by the Chancellor. It has been discussed between Departments and between the Chancellor and the Deputy Prime Minister.'

He added that the Government continued to review the company car taxation regime to see how it might send better environmental signals which are more in tune with the integrated transport white paper. Lord Whitty, parliamentary under secretary of state in the Department of the Environment, Transport and the Regions, speaking in a House of Lords debate he said: 'There is a perverse incentive to increase the alleged business miles over the figure of 18,000 a year. As the Chancellor indicated, he is examining the situation to try to remove the perversity. As regards the taxation regime and further policy, your Lordships will have to observe a little patience. There will be a Budget statement later this year. I could not possibly pre-empt anything that might be said in that context.'

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