Fleet News

Brown faces call for CO2 tax relief

A LAST ditch bid has been launched to persuade Chancellor of the Exchequer Gordon Brown to introduce tax breaks for high-mileage company car drivers under the new carbon dioxide-based company car tax system.

The call for action is aimed at winning a vocal show of support from Brown when he announces his pre-Budget statement next Tuesday.

Accountancy firm Ernst & Young made the call, suggesting the introduction of a 25 per cent tax discount for drivers who exceed 12,000 business miles a year, after the new CO2-based system is introduced next April.

Under the current company car tax system, drivers covering in excess of 18,000 business miles a year pay tax on 15 per cent of the P11D value of their cars (discounted from a maximum 35 per cent), with a further 25 per cent discount available for cars that are at least four years old at the end of the tax year.

The minimum tax threshold will remain at 15 per cent under the new tax system, but only the lowest emission cars will qualify for this. As a result, many of today's 500,000 high-mileage drivers will see their tax bills rise, with the 'average' 2.0-litre petrol driven car producing 190g/km of CO2 and incurring a tax bill of 20 per cent of price.

Alastair Kendrick, director in Ernst & Young's global employment solutions practice, said: 'These business drivers contribute enormously to the UK economy. Introducing a 25 per cent reduction will recognise that people should not be penalised for the large number of miles they cover on behalf of their company.'

However, previous attempts to win concessions from the Government have failed. Lex Vehicle Leasing called for the introduction of a 'taper relief' scheme offering drivers a one percentage point tax reduction for every 1,000 business miles beyond 18,000 miles, but the Inland Revenue dismissed the idea.

Jon Walden, managing director of Lex Vehicle Leasing, said: 'This new system is very unfair. It does not recognise the fact that people are using their cars as a business tool. We sought to persuade the Government to retain the tax break, but so far our pleas have fallen on deaf ears.'

His comments mirror the findings of the largest survey carried out into the opinions of fleet managers and company car drivers, revealed in Fleet News a fortnight ago. Although 60.3 per cent of fleet managers supported the idea of an emissions-based system, more than half said the current design should be scrapped.

However, Stewart Whyte, director of the Association of Car Fleet Operators, said fleets first needed to justify whether their drivers needed to do high mileages, before asking for Government help.

And Mary Braim, Inland Revenue adviser on employee benefits, said: 'There will be no changes. This system was unveiled two years ago and approved in the Finance Bill. However, we will evaluate the system as we go along.'

  • For up to the minute coverage of the Chancellor's Autumn Statement, log on to Fleet NewsNet next Tuesday afternoon.

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