Fleet industry commentators and financial experts have been predicting for some time that the report will contain details of the chancellor’s intentions to reform the company car tax system and introduce incentives for low emission cars.
The report is all the more important as it comes in advance of a probable early election.
Tax analysts point to the changes to the benefit-in-kind tax system to include a new 10% band for cars that produce 120g/km or less of CO2.
Fleet managers are being advised that while there are now a range of cars available at or below this emissions’ cut off point, they must take into account a vehicle’s specification, which could push a vehicle over the limit.
“This will bring in some interesting challenges for the industry, said Robert Kingdom, head of marketing and business development at Masterlease.
“The exact CO2 will depend on the car’s specification and we don’t know that until we get the V5 back, which of course is too late for the driver involved if it pushes him into the next band, which could mean a 50% difference in his personal tax bill.”
Despite these anomalies, the chancellor is on the right track, thinks Mr Kingdom. “The agenda is likely to be driven by environmental objectives,” he said.
“There can’t be that many challenges to environmental taxation and events such as the rapid adoption of diesels are evidence that you can get significant change in the business car market through tax changes.”
According to the Campaign for Better Transport, the industry must expect measures to cut carbon emissions from transport.
“Transport Secretary, Ruth Kelly, committed the Department for Transport to produce a carbon reduction strategy for transport, and we expect an interim report from Professor Julia King who is conducting a review for DfT and treasury on decarbonising road transport,” explains Stephen Joseph, the campaign’s executive director.
“Some possibilities for the spending review include a purchase tax on new cars with high charges for gas guzzlers and low or even negative charges for low emission vehicles.”
As an alternative to this, higher vehicle duty may be introduced as previous budgets have raised the tax on high emission vehicles but only to £400 a year and the industry says it would need to be £2,000 a year to make a real difference.
More company car tax reforms are also on the way says Mr Joseph, including changing car allowances for business use of private cars to reflect fuel efficiency and emissions.