Fleet News

VED scheme holds clues to 2002 car tax regime

FLEETS should examine the new Vehicle Excise Duty system which comes into effect in autumn 2000 for clues to the format of the new company car tax regime scheduled for April 2002. Both have strong environmental justifications, and both will be based primarily on carbon dioxide emissions.

It would certainly prove a popular policy with fleets if the Government introduced the same strategy to the implementation of the new company car tax regime as it did with the VED system. The new graduated VED will apply only to vehicles registered after the debut of the new system, while the current car parc will continue to pay either the sub-1.1 litre or plus-1.1 litre rates. If the Treasury announced that company cars registered before April 2002 would continue to be taxed under the current benefit-in- kind regime for the rest of their fleet lives, and only cars registered after the start of the 2002-03 tax year would fall under the remit of the new scheme, it would allow employers and employees to select cars in the interim with confidence that they will not face sharp tax increases in 2002.

Rudimentary calculations suggest that if the new company car tax system is to be revenue neutral, it will have to be based at about 25% of a car's list price, and then weighted according to its emissions. Inland Revenue figures show that 10% of fleet drivers cover fewer than 2,500 business miles a year, while 30% exceeded 18,000 business miles. This leaves the vast majority in the middle 2,500-17,999 business mileage category, and under the tax system which comes into effect in the 1999-2000 tax year they will face a taxable benefit of 25% of a car's list price.

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