ACFO has welcomed the clarity given by the chancellor on future levels of company car tax, after lobbying HM Revenue and Customs and HM Treasury.
Company car benefit-in-kind tax rates up to April 5, 2019 were revealed in Wednesday’s Budget by George Osborne.
ACFO chairman Damian James (pictured) said: “At meetings with HM Treasury and HM Revenue and Customs’ officials, ACFO has repeatedly asked for benefit-in-kind tax rates to be known for what, in the vast majority of cases, will be the entire operating cycle of a vehicle.
“Historically we have only known benefit-in-kind tax rates for three years, and occasionally four years, in advance.
“However, as businesses have moved to longer replacement cycles with company cars driven into a fourth and even a fifth year in some cases, employees have been left in the dark as to what their benefit-in-kind tax bills will be in their final year or two.
“Benefit-in-kind tax rates up to the end of the 2016/17 financial year were already known. Therefore, the decision of the Chancellor to announce rates for 2017/18 and 2018/19 is to be welcomed.
“It means that company car drivers can make their vehicle selection in clear knowledge of what their benefit-in-kind tax liability will be for the lifetime of the car.
We hope that this five-year benefit-in-kind announcement cycle is retained in future Budgets.
“The decision of the Chancellor to maintain the differential between the three lowest company car tax rates -50 g/km, 51-75 g/km and 76-94 g/km - at a higher level for longer than previously announced is also to be welcomed.
“In Budget 2013, the Chancellor said that the differential between the three rates would be three percentage points in 2017/18 reducing to two percentage points in 2018/19. However, in Budget 2014 he changed his mind and said the differential would be four percentage points and three percentage points respectively.
“It is a helpful move and means that employees choosing low emission vehicles will pay a lower rate of benefit-in-kind tax than previously envisaged. It is a positive incentive to choose a low emission company car.
“Nevertheless, the rates announced still mean that an employee choosing a company car with emissions up to 50 g/km, such as an electric car, will go from paying 0% benefit-in-kind tax in 2013/14 and 2014/15 to 5% in 2015/16, 7% in 2016/17, 9% in 2017/18 and 13% in 2018/19, which is a series of steep increases.
“Furthermore, cars with emission levels below 95 g/km are not hugely plentiful at the moment. Therefore, we hope that vehicle manufacturers will continue to focus on introducing more vehicles into these lower tax bandings in the coming years.
“These should not be just niche vehicles, but cars that are wholly fit for purpose for a wide range of fleet applications and lifestyles.”
ACFO also welcomed the announcement to freeze fuel duty again, but suggested the Government could still do more.
James said: “ACFO is pleased that the Chancellor has cancelled the 1.6p + VAT fuel duty increase scheduled for September 1. However, the move does not stop forecourt prices from rising in the future at the whim of suppliers.
“What the Chancellor really needed to do to give business and consumers a real boost was to cut fuel duty, not simply cancel a planned future tax increase.”