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ACFO urges Chancellor to provide company car tax clarity in 2018 Budget

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Fleet operators’ organisation ACFO is urging Chancellor Philip Hammond to announce the company car benefit-in-kind tax regime until the end of the 2024/25 financial year.

This would give fleets clarity and not undermine long-term fleet planning by introducing changes during the period. Currently, published BIK rates run only until the end of 2020/21.

The call for the BIK tax rates is part of the organisation’s 2018 Budget wish list following meetings with HM Revenue and Customs, HM Treasury and Department for Transport officials.

ACFO is also working with Fleet News and the British Vehicle Rental and Leasing Association to make a joint representation to Treasury ahead of the Budget as part of the Fleet Budget Manifesto 2018.

John Pryor, ACFO chairman, said: “This year the company car, a long-time favourite employee benefit, has come under increasing pressure due to the government refusing to commit to announcing benefit-in-kind tax rates long-term and tinkering with long-established rules.

“As a result, ACFO wants the Chancellor in his forthcoming statement to provide long-term tax stability and clarity to enable fleet decision makers to compile company car choice lists in the knowledge that they will not be usurped by tax changes.

“Additionally, if the government is to achieve its environmental objectives, it is critical that company cars have a future.

“The year-on-year increase in the tax burden is likely to drive more employees to give up company cars, which historically have always been among the most environmentally-friendly as they feature the very latest cutting-edge technology.

“If a combination of the rising tax burden and long-term tax uncertainty continues then it will drive more employees out of company cars.

“What’s more, the government’s hoped for significant take-up of plug-in models, which is being led by fleets, will not be achieved, and overall CO2 emissions are likely to rise as we know that staff giving up a company car typically opt for one with higher emissions when making a personal acquisition decision.”

ACFO’s call follows months of BIK tax uncertainty, resulting In some fleets putting vehicle replacement on hold and some employees opting out of company car schemes.

The Government may also decide to realign rates from April 2020 following the introduction of the Worldwide harmonised Light vehicles Test Procedure (WLTP) for homologating vehicle emission and fuel economy data.

ACFO has also called on the Chancellor not to make unexpected - and unwarranted - changes to tax rules at short notice, highlighting the Budget 2017 announcement of an increase in the company car benefit-in-kind tax diesel supplement from 3% to 4% from April 6 this year.

The organisation wants to see the diesel supplement reconsidered arguing that the latest generation of Euro6 emission diesel cars are among the ‘cleanest’ on the roads.

ACFO is also continuing to call for an advisory electricity rate (AER) for plug-in hybrids to be introduced following the announcement of a reimbursement rate for pure electric vehicles.

The organisation also hopes the Chancellor will:

  • Perform a U-turn on the decision to increase to 16% benefit-in-kind tax on cars with emissions of 50g/km or below in 2019/20 and bring forward the already announced reduced rates, including the 2% threshold for 100% electric models and those with an electric mileage range of up to 130 miles, to April next year from 2020/21.
  • Remove uncertainty over the government’s commitment to continuing plug-in car and van grants by pledging that they will remain in place for the long term.

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