Fleet News

Brown's Budget tax rethink

CHANCELLOR of the Exchequer Gordon Brown is expected to relax the Government's inteprepation of what are 'clean' and dirty' cars so as not to scare company car drivers out of their vehicles when he announces details of the new carbon dioxide-based benefit-in-kind tax system in next month's Budget.

The Chancellor will use the Budget to launch a framework applying to every company car on the road from April 6, 2002. But Fleet NewsNet understands that despite protracted discussions, the Treasury has still to resolve a number of crucial issues. It is understood the Chancellor will use the March 21 Budget to announce the benefit-in-kind tax treatment of petrol-engined cars from 2002. However, he may also announce that further discussions with the fleet industry must take place on the benefit-in-kind treatment of both diesel and alternatively-fuelled vehicles including gas powered and hybrid cars.

While the new tax system will be based on 21 bands increasing in 5g/km of CO2 steps, sources close to the ongoing discussions told Fleet News this week they expected the 135g/km starting point will be relaxed to 150g/km or 160g/km and the upper limit relaxed from 231g/km to 250g/km or 260g/km. At the 'clean'end of the scale company car tax will be based on 15% of list price, rising 1% for each 5g/km of CO2 to a maximum of 35% of list price for the 'dirtiest' cars.

The Government will stick to its pledge to scrap the 2,500 and 18,000 business-mile tax breaks and the tax reduction for company cars over four years old. It is expected that as new technology comes to the fore, the CO2 thresholds will be reduced in successive years.

While the tax treatment of gas-powered vehicles and hybrids remains unclear, Fleet News understands that the Government may not completely give in to the pro-diesel lobby and abandon its original plans to penalise diesel cars by 3% above their CO2 tariff. Instead it is believed that non-common rail diesels could face a 3% penalty, while new cleaner technology common rail diesel engines could be penalised by 1%. That would still mean that company car drivers will pay less benefit-in-kind tax on a so-called 'clean' diesel than the equivalent petrol-engined car.

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