The essential points from today's budget
Company car tax
Company car fuel
Capital allowances for cars
As part of the Government’s commitment to 'reducing the administrative burden in the tax system', the Budget announced further detail on options for simplifying the rules for capital allowances on cars.
The government said today in supporting Budget documentation that its preferred option was to retain the existing 100% first-year allowance for cars with CO2 emissions up to 120g/km; use the general plant and machinery capital allowances pool for cars with CO2 emissions between 121 and 165g/km and introduce a new pool, with a lower writing-down allowance than that of general plant and machinery pool for cars with CO2 emissions above 165g/km.
'The proposed option limits the number of rates that business would have to identify. It also ensures the value of the allowance across the CO2 range represents a significant percentage of the typical car's price in order to provide an incentive towards the purchase of cars with lower CO2 emissions. In particular the option utilises the existing general plant and machinery capital allowances pool for many cars as a means of reducing compliance costs,' the Treasury said today.
The 2006 consultation suggested the Government is considering abolishing or reforming the lease rental restriction for 'expensive cars'. In moving the tax deduction onto a CO2 emissions basis, the government believes it is appropriate to reflect the CO2 bands for capital allowances purposes.
The options being considered are to:
a) abolish any lease rental restriction to all cars with CO2 emissions up to 165g/km, permitting the full allowance of leasing payments against the profits of businesses leasing those cars
b) apply a uniform fixed percentage disallowance on all the leasing payments that businesses can offset against profits for all cars with emissions above 165g/km.
However, the Government has said the consultation on these issues will continue. Comments made in consultation will be published in the summer. Further comments are required by May 16, 2007.
|Pence per litre (unless stated)||Old duty rate||Change||New duty rate|
|Ultra-low sulphur petrol/diesel||48.35p||+2p||50.35p|
|Sulphur-free petrol/diesel||48.35p||+ 2p||50.35p|
|Liquefied petroleum gas used as road fuel||12.21p per kg||+ 4.28p per kg||16.49p per kg|
|Natural gas used as road fuel||10.81 per kg||+ 2.89p per kg||13.70p per kg|
|Rebated gas oil (red diesel)||7.69p||+ 2p||9.69p|
|Fuel Oil||7.29p||+ 2p||9.29p|
All fuel duty rate changes will take effect from October 1, 2007
Graduated vehicle excise duty (VED) for private vehicles (registered March 2001)
|VED band||CO2 emissions (g/km)||Change||Alternative fuel cars||Petrol cars||Diesel cars|
|A||100 and below||-||£0||£0||£0|
|B||101 to 120||-£15/-£5/-£15||£15||£35||£35|
|C||121 to 150||£5/£15/£5||£95||£115||£115|
|D||151 to 165||£5/£15/£5||£120||£140||£140|
|E||166 to 185||£5/£15/£5||£145||£165||£165|
|F||186 to 225||£10/£15/£10||£190||£205||£205|
|G*||226 and above||£85/£90/£85||£285||£300||£300|
*for new cars registered from March 23, 2006.
Source: HM Treasury
VED for light good vehicles (registered March 2001)
|£ per year||Change||New rate|
|Euro IV incentive*||+£5||£115|
*for Euro IV compliant vans registered between March 1 and December 31, 2006
Tim Hudson, commercial director at LeasePlan, said: ‘It comes as no surprise that ‘gas guzzlers’ have been hit hard by the increase in the top band of VED and that greener vehicles have been encouraged by a much kinder tax structure.’
Edmund King, executive director of the RAC Foundation, added: ‘Incentives to go green are welcome.Mr Brown's radical proposal for tax disc reforms gives a green light to cleaner motoring. Drivers and manufacturers need time to change their vehicles. Reduced tax for cleaner vehicles is a great incentive to help motorists choose the most environmentally friendly model suitable for their needs.’
Sue Robinson, director of the RMI national franchised Dealers Association (NFDA), said: 'The Chancellor has attacked the motorist with the increase in VED for 4x4s and other large vehicles, but has failed to offset this by any extra investment in transport. There are more effective ways to influence the buying habits of motorists than the ‘blunt instrument’ approach of a road tax increase.
‘Instead of punishing motorists for choosing what is available, the government should be doing much more to encourage vehicle manufacturers to develop hybrid vehicles,'
Alison Chapman, tax partner at Deloitte said: 'These changes may not influence the sale of new high emission cars to a retail customer. However the effect on companies is likely to be very different. A drop in anticipated re-sale value (plus the increased annual cost) can have a big effect on the whole life cost to the company which is then less likely to want to add these cars to its fleet.
In addition, it is expected that there will be a change to the basis of taxation on the capital cost of company cars. This is expected to move to taxation on an emission basis from April 2008.'
'The Chancellor has ignored the opportunity to generate market demand for biofuel. He seems to expect industry and the consumer to do all the work to get biofuel going, without the much-needed tax inducements or Government support,' said Ray Holloway, director of the RMI Petrol Retailers Association.
Alison Chapman, tax partner at Deloitte said: 'This will further discourage companies from having high emission cars on their fleet. As a result companies will have to reconsider some of the cars that they allow their employees to drive, as the increased cost of higher CO2 emission cars hits home, and the many 'user-chooser' fleets in this country will start being more selective. Smart companies will start to bring tax into their calculations of the whole life cost of the cars on their fleets.' And finally...