The good news is the change will not come into effect for chargeable periods ending on or after April 1, 2012.

“The reduction of capital allowances rate from 20% to 18% will affect cars with CO2 emissions between 110g/km and 160g/km and the reduction of capital allowances rate from 10% to 8% will affect cars with CO2 emissions over 160g/km,” explains Hull.

“Technically the reduction in the rate of writing down allowances should represent a timing difference in claiming tax relief. However, in practice, it is likely to increase the amount of tax relief owed by HMRC at any point in time and thereby can be viewed as a permanent increase in funding the deferred tax for car fleet.”

The reduction in capital allowances rate represents a reduction of 10% (from 20% to 18%) for the main pool but 20% (from 10% to 8%) for the special rate pool, so further increasing the relative tax disincentives of high emission cars compared with lower emission cars.

The impact of the tax changes should spark a funding review, says ACFO. Its chairman Julie Jenner said while the Emergency Budget will not spark a major change in the way fleets are funded, all fleets should re-examine their funding methods. This is a view shared by Andrew Leech, business manager at Mycompanyfleet.

“Businesses will have to look closely at which is the optimum funding method for them,” he said.

“Contract hire could now become more attractive as a funding method because of the element of VAT recoverability in monthly lease rentals, while outright purchase fleets will simply have to swallow the increase.

“Fleet managers will need to take some tough decisions now to ensure they are not storing up an extra cost burden for their companies over the next three years.”