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Government launches three consultations on tax policy affecting fleets

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The Government has issued consultations on three key areas of tax policy affecting the fleet sector – salary sacrifice schemes, lease accounting and company car tax treatment of ultra-low emission vehicles (ULEVs).

The British Vehicle Rental and Leasing Association (BVRLA) told Fleet News it welcomed the clarity that these consultations provide on the Government’s policy positions, and will work with its members to ensure that the fleet industry’s views are properly represented to HM Revenue and Customs (HMRC) and HM Treasury (HMT).

In terms of company car tax treatment of ultra-low emission vehicles, HMT is seeking views on how the company car tax system can be adapted to take into account the growing number and variation of ultra-low emission vehicles, while encouraging their uptake.

BVRLA chief executive Gerry Keaney said: “For some time we have been calling on the Government to increase the number of ULEV tax bands and narrow the CO2 gaps, so that greater incentives can be provided for those choosing the cleanest vehicles.

“The Government is right to explore whether zero-emission range could be used alongside CO2 emissions to produce a more effective set of company car tax bands, but it needs to ensure that any new system does not become too complicated.”

Meanwhile, the Government is concerned about the rising costs of salary sacrifice schemes and is considering limiting the Income Tax and National Insurance contribution advantages available through these schemes.

However, Keaney said: “These schemes offer a valuable way of rewarding and retaining staff, particularly for many public sector organisations who have had to struggle with long-term pay freezes.

“The vast majority of staff receiving this valuable perk are in the basic income tax bracket and salary sacrifice schemes provide them with a unique opportunity to drive a newer, cleaner and safer car than they would otherwise.

“The new car sales generated by salary sacrifice schemes give a valuable boost to the UK economy and provide a more sustainable alternative to the older, more polluting grey fleet vehicles that staff might otherwise use for business travel.”

Finally, the Government is also seeking views on how new lease accounting rules will impact the tax treatment of leased assets, and how tax legislation will need to adapt.

Keaney said: “We will be working closely with HMRC to ensure that these long awaited new lease accounting rules result in a simpler and fairer tax treatment of leased assets, particularly for low emission vehicles that should be entitled to enhanced first-year capital allowances.””

Tusker believes the Government is also at risk of contradicting its own stated aims and objectives regarding low CO2 vehicles. Since they were reformed in 2002, the BIK structure for company cars has encouraged the uptake of low CO2 vehicles, accepting that tax revenues will drop in order to lower emissions.

David Hosking, chief executive officer at Tusker, said: “The proposal regarding salary sacrifice cars will unfairly penalise drivers of low CO2 vehicles in order to recoup lost tax revenue, contradicting the original policy. Because of this favourable tax structure that the Government has created, the uptake of low CO2 vehicles, hybrids and electric vehicles is much higher under salary sacrifice than for new car sales as a whole.  This has had a hugely positive impact on the average CO2 of this group of drivers – 101g/km compared with 121g/km of all new car registrations according to the SMMT.”

To respond to each consultation, follow the links below:

Salary sacrifice - https://www.gov.uk/government/consultations/salary-sacrifice-for-the-provision-of-benefits-in-kind

Benefit-in-kind – https://www.gov.uk/government/consultations/company-car-tax-for-ultra-low-emission-cars

Lease accounting changes - https://www.gov.uk/government/consultations/lease-accounting-changes

Read next week’s Fleet News for more on the Government consultations and what it may mean for fleets.

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