Fleet News

Pre-Budget analysis: What's in it for the fleet industry?

DELOITTE and Touche senior manager David Rawlings predicts what fleets should expect.

At this time of year it seems as if every conversation I have has to contain the question: 'What is going to be in the Budget?' Visually sucking in my breath, looking sage-like at the floor and shaking my head gives a very good effect.

Unfortunately, I can usually only reply: 'My guess is as good as yours.'

But without healthy speculation and a spirit of adventure, where would we be? So giving it my best crystal ball-gazing focus, here are my tips for the 2004 Budget.

Company car tax charge 2006/07

I would think it unlikely that the Government would decide to introduce a completely new method of calculation.

However, the method of calculation that was introduced in 2002 still allows the Government many opportunities for influencing company car drivers' decisions.

We may just see a simple increase of 1% above the changes announced last year for 2005/06. On the other hand, is the Government happy with the massive increase in diesel cars now coming onto the roads? Does it want to control other forms of vehicle pollution, such as noise?

Company vans

A consultation paper on employer-provided vans was published in May 2003. It is clear that the Inland Revenue (IR) is having difficulties in a number of areas.

It wants to encourage the purchase and use of more environmentally-friendly vans but currently there are no published CO2 emissions of vans and so the approach adopted for company cars cannot be followed. The IR believes the private use of vans is insufficiently taxed but does not want to penalise van drivers who are 'real' job-use drivers. As a result, the consultation paper asked a series of questions but did not provide many answers.

The IR has indicated that its preferred direction for a new taxation system is as follows:

  • A scale charge being retained
  • Different levels of charge according to the level of private benefit
  • No reduction in the benefit for older vans and a higher scale charge for older vans
  • A reduced level of charge for vans meeting Euro IV emissions standards, which will be mandatory for all new vans from 2006
  • A reduction in the tax charge for vehicles that run on alternative fuels
  • Removing the complexity from the charging provisions for shared vans, but the details are unclear
  • A separate fuel benefit charge

    We wait and see.

    Mileage rates for business use of private cars
    I think that these are unlikely to change. The system is fairly new and probably still gives a neutral(ish) position for a typical company car.

    Tax on employer-provided free fuel
    As the new method of calculation was only introduced from April 2003, a change would be unlikely. Company car drivers who receive this dubious benefit must redo their calculations as it is based on CO2 emissions and uses the same percentage graduations, including discounts and premiums, as used in the company car tax system. Most employees are still unlikely to be better off taking free fuel. I would like to see many more employers waking up to the fact that the practice of giving company car drivers free fuel for private use is no longer a benefit.

    VAT fuel scale charge
    VAT scale charges have always increased to reflect an increase in fuel prices. I cannot see this changing.

    Vehicle excise duty
    This is now used as a half-hearted way of influencing driver's decisions by being generous to the owners of smaller-engined cars. Does the driver of a £60,000 3,000cc car really consider the saving of under £100 is enough to make him run a 1,200cc vehicle? Although it is possible that we could see radical changes such as putting the prices up dramatically or scrapping it altogether, I think we will just see routine price increases.

    Alternative fuels
    The Government stated in the pre-Budget statement that the environmental benefits offered by Liquid Petroleum Gas (LPG) no longer justify the level of duty differential it currently receives. I expect the Government will gradually increase the duty rate for LPG over the next three years, bringing the amount of duty in line with its environmental benefits.

    Whatever comes in the Budget, I know one thing I am prepared to bet on is that most of us will still be driving cars this time next year.

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