ACFO is urging the Government to adopt a six-point action plan to protect and enhance company car demand.
The fleet decision-markers’ organisation has submitted the plan to HM Treasury as part of its review into the impact of the WLTP (worldwide harmonised light vehicles test procedure) on company car benefit-in-kind tax and vehicle excise duty.
The introduction of WLTP has generally increased the official CO2 emissions of many cars by up to as much as 20%, but the BIK tax bands have not changed to reflect this, meaning that drivers are paying significantly more tax for using the same vehicle.
ACFO says businesses are closing company car schemes with employees opting for cash due to year-on-year rises in BIK tax and uncertainty over future taxation levels.
Chancellor of the Exchequer Philip Hammond is expected to indicate the direction of travel on any changes to the existing BIK and VED regimes in the Government’s Spring Statement on Wednesday, March 13.
That is likely to be followed by a consultation on the technical legislation when it is published in July with any changes due to be introduced in April next year.
Caroline Sandall (pictured), ACFO deputy chairman, said: “The Government cannot continue to treat company cars as ‘a cash cow’.
“Word from the Government has previously been that it sees the transition to a tax system based on WLTP CO2 emission figures as being tax neutral and it must adhere to that.
“Furthermore, if the Government is to achieve its ambition to reduce vehicle emissions then it must ensure that the tax regime supports and enhances demand for company cars, the newest and cleanest cars on the roads, and make the changes as ACFO has outlined in its action plan.”
ACFO has urged the Government to:
- Realign BIK tax bands to smooth the transition to WLTP or consider a ‘grandfathering’ of cars registered prior to 2020 to account for the rise in CO2 emissions under WLTP testing
- Implement the 2% benefit-in-kind tax rate for cars with CO2 emission of 0-50g/km immediately and not wait until 2020/21 as scheduled
- Provide a continuous four-year view of company car benefit-in-kind tax thresholds to give employers and drivers certainty over future bills
- Remove the existing 4% benefit-in-kind tax supplement on diesel cars that do not meet the Real Driving Emissions Step 2 standard
- Confirm an extension of the existing plug-in car grant scheme for at least two years to provide fleets with a period of stability and certainty
- Consider further incentives, such as congestion charge exemption and free parking in urban areas, in addition to BIK tax, to encourage increased adoption of ultra-low emission vehicles.
In its submission to Government, ACFO highlighted HM Revenue and Customs’ data showing that while the volume of company cars on the road was reducing, the tax take from drivers and companies paying Class 1A National Insurance on the benefit was increasing.
Furthermore, the Office for Budget Responsibility has already factored in an additional £500 million flooding into HM Treasury coffers as a result of the impact of WLTP on taxation by 2024.
Arguing that the existing CO2-based company car tax regime had “successfully driven down CO2” and enabled drivers to select plug-in hybrid and zero emission cars, ACFO said: “This has a direct impact upon new car sales, but also serves to provide a channel of low emitting vehicles into the national car parc.”