Fleet News

Budget leaves fleets confused

THE 1999 Budget has confirmed the long term future of the company car, but left fleets confused as to what constitutes a 'green' vehicle. There are genuine environmental arguments supporting Chancellor of the Exchequer Gordon Brown's plan to introduce a company car tax regime which is based on a vehicle's emissions performance and offers no discounts for business miles driven.

But his sketchy policy has left fleet decision-makers in the dark over which emissions the Government most wants to reduce - an issue which is sure to feature in the PricewaterhouseCoopers-sponsored Business Forums at the Fleet Show at the NEC, Birmingham from April 27-29. Brown's Budget speech was peppered with references to the UK's commitment to reduce its production of carbon dioxide, the number one greenhouse gas, and cutting CO2 emissions is the primary goal of the new graduated Vehicle Excise Duty, due in autumn 2000. This should heavily favour diesel-powered cars which produce far less CO2 per mile driven than equivalent petrol-engined cars, yet HM Customs & Excise has unduly weighted fuel duties against diesel.

And in the proposed reforms to company car tax the Inland Revenue invited comments about whether the new emissions-based tax, scheduled for April 2002, 'should also take into account local pollutants (such as particulates and nitrogen oxides) as well as carbon dioxide emissions.' The conflicting message this week saw the RAC call on the Treasury to provide 'clear and early detail' on the carbon dioxide bands which will form the foundations of both the new VED and company car tax system.

The industry's concern is that diesel fleet operators and drivers around the country will pay the price for localised pollution in just a few urban areas, problems which by 2002 will be tackled by wider use of low sulphur diesel, congestion charging and workplace parking taxes. Yet the Government's decision not to target so-called 'perk' drivers who cover fewer than 2,500 business miles a year has been positively received, even if the regime until April 2002 retains its illogical incentives to clock up excessive miles on company business.

The Budget at a glance

  • From April 2002 the company car tax scale charge based on 35% of a car's list price will be replaced by a graduated scale based on the level of a car's carbon dioxide emissions. Consultation will take place.
  • Changes to company car tax from April 6 - and to remain in force until the reform - are: reducing the discount for business mileage of between 2,500 and 17,999 miles a year - the charge will now be based on 25% of the price of the car; similarly, reducing the discount for driving 18,000 or more business miles annually will be based on 15% of a car's list price; discounts for cars over four years old and second cars are also reduced.
  • Fuel scale charges for company car drivers who receive free fuel for private use increase by 20% from April 6.
  • The tax charge for van drivers who can take their vehicle home remains unchanged at £500.
  • Duty on leaded petrol increased by 4.25p a litre/19.3p a gallon; duty on unleaded petrol increased by 3.79p a litre/17.2p a gallon; duty on diesel increased by 6.14p a litre/27.9p a gallon; duty on ultra low sulphur diesel increased by 4.96p a litre/22.5p a gallon; duty on gas road fuel cut by 29%.
  • A further 20% rise in scale charges on 'free' company-provided fuel for private use.
  • Vehicle Excise Duty increased by £5 to £155 immediately with the exception of vehicles under 1.1 litre which will pay £100 from June 1.
  • Vehicle Excise Duty to be based on carbon dioxide emissions from autumn 2000.
  • Promotion of 'green transport measures for employees with the removal of employee benefit-in-kind tax on works buses, subsidies to public bus services, bicycles and cycling safety equipment and workplace parking for bicycles from April 6; introduce capital allowances and a tax free cycling allowance of up to 12p a mile for employees using their own bicycles on business travel; allow employers to pay tax free for alternative transport when car sharing arrangements break down.
  • Abolition of the £200 scale charge on mobile telephones provided by employers to employees and used for personal calls from April 6.
  • Standard rate of Insurance Premium Tax is increased from 4% to 5% from July 1.

For your free ACL guide to how this Budget affects company cars - published in conjunction with Deloitte & Touche - click here.

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