Fleet News

Budget 2021: Fleet industry reacts to Chancellor’s tax plans

Chancellor Rishi Sunak

The Chancellor, Rishi Sunak, delivered his Budget today with a freeze in fuel duty for fleets, but no mention of company car tax.

Paul Hollick, chair, of the Association of Fleet Professionals (AFP), said: “This was a Budget that, from a fleet industry point of view, was much more important for its broad macroeconomic sweep than for any detail issues.

"Yes, we’d like to see indications of more work happening at the Treasury in areas such as the future of benefit-in-kind taxation for company cars and vans, as well as wider transport issues such as road charging, but the crucial thing for the moment is that businesses continue to be financially supported through the historically tough economic conditions that we are all facing.

"On that front, the Chancellor appears to have delivered although only someone who hadn’t been paying attention to the coronavirus crisis so far would bet against further, targeted help being needed in the future. 

"One point of note are the plans for freeports around the UK which, if successful in terms of generating manufacturing, could become hubs of quite intensive fleet activity.”

Ashley Barnett, head of fleet consultancy at Lex Autolease, says that the affordability of electric vehicles (EVs) is a “key barrier” towards mass adoption and for some people, so a petrol or diesel vehicle remains their only option.

“Against the backdrop of the pandemic, many people are still using cars as a safer mode of transport and any rises would feel counterproductive at this moment in time,” he said. 

“As momentum continues to shift away from petrol and diesel, a future rise in the 10-year fuel duty freeze feels inevitable and will help fund investment in greener alternatives.”

Fiona Massey, fleet consultant at Zenith, said: “The Chancellor brought some welcome good news with the upgrading of the forecast for GDP growth and jobs. A stronger and earlier economic bounce back is positive for all sectors and supports fleet demand.

“The Government reiterated its commitment to decarbonisation and the Road to Zero, and the industry was given much-needed stability with no significant changes to company car taxation.”

The BVRLA has welcomed the introduction of a new 130% capital allowance super-deduction, which it says could be used for investment in electric vehicle (EV) charging infrastructure.

“The Chancellor has provided support and incentives where they are needed most,” said BVRLA chief executive, Gerry Keaney.

However, he added: “We are disappointed that the Government has given no further indication of the longer-term motoring tax roadmap it will use to drive decarbonisation, but there is lots of consultation going on and we expect more news on this in the coming months.”

Jon Lawes, managing director, Hitachi Capital Vehicle Solutions: said “This was an optimistic budget for those of us hoping for significant investment in infrastructure to speed up the adoption of EVs and deliver a greener economy.

“The announcement of the UK’s first Infrastructure bank, based in Leeds, signals the Government’s commitment to reach net zero carbon by 2050 and bring about the green revolution we need.

“In the EV sector alone, we’ve seen rapid development in technology over the last decade and we are now at the tipping point where the infrastructure needs to match demand. 

“If we are to accelerate adoption, we need this new body to prioritise support for essential electric infrastructure.”

Peter Golding, managing director, FleetCheck, said: “This was a Budget that was very much designed to keep the economy moving as we emerge from the coronavirus crisis.

“Any concerns that the Chancellor was going to start aggressively clawing back some of the enormous sums that have been spent keeping businesses and individuals afloat over the last year appear to have been largely misplaced, with only a few, relatively minor apparent measures such as the 2023 Corporation Tax increase.

“This was instead all about providing a platform for the UK to move forward from the pandemic in a relatively structured fashion and there were some interesting ideas in there such as the investment superdeduction and various commitments to levelling-up spending.

“In terms of absolute specifics though, there was little detail in there of interest to the fleet sector and it may be that we have to wait for the Autumn Statement to find out more about the Government’s post-pandemic transport policies and how they may affect us.”

Richard Hipkiss, managing director of Fleet Operations, said: “At a time when the fleet industry is feeling the financial squeeze, a freeze to fuel duty will undoubtedly be welcomed.

“Though we are set firmly on the road to a fossil-fuel free future, the pandemic has put some road blocks in place. Sustainability objectives, though critical, may have had to take a backseat temporarily as companies set their sights on surviving rather than thriving in the current climate.

“With alternative fuels becoming more mainstream, aided by improved EV accessibility and affordability, fleet operators should expect to see a hike in fuel duty in the coming years, as the government reinvigorates its green pursuit – but for now, efforts can be concentrated on recovery.

“The 2023 corporation tax increase, which is part of plans to boost finances, will serve to make capital allowances and tax relief on low and zero emission vehicles more favourable, which could further encourage EV take up for fleet managers who make policy decisions on post-tax TCO.”

David Brennan, CEO of Nexus Vehicle Rental, said: “After more than a year of uncertainty surrounding Brexit and Covid-19, we can now see some light at the end of the tunnel with the success of the vaccine rollout and the Government’s ‘road map’ out of lockdown, however, we can now look ahead with optimism. The Chancellor’s assertion that for businesses, certainty matters, cannot be understated.

“It was inevitable that the country would have to repay debts racked up throughout the pandemic, with a rise in corporation tax by even just 1% would contributing an extra £3bn to this, helping the UK push its way into recovery, so we should be reassured that the increase from 19% to 25% is in the best interests of the country.

“Given this will not come into effect until 2023 and operate on a sliding scale for firms, it’s encouraging that the chancellor recognises now is not the time to raise taxes for business, many of whom are struggling with restrictions and need time to get back on their feet.”

He continued: “A renewed commitment to green growth is reassuring, and given our headquarters in Leeds, it’s especially gratifying to hear that the first ever UK infrastructure bank will be located in in the city and focused on investing in the green industrial revolution from the spring.

“The continued freeze on fuel duty for the eleventh consecutive year should prove a relief to many as well.

“The Government’s continued support of the transport and logistics sector, which is critical to the UK economy, is extremely welcome.

“However, whilst the Government is also clearly sign-posting fleets towards a greener future in light of the looming petrol and diesel ban in 2030, it must further support the production of EVs to increase affordability, as well as put the appropriate infrastructure in place, to enable more businesses to see how this transition could be a realistic solution.

“It remains to be seen how the opportunities presented by freeports and tax freezes will translate into the fleet sector but the level of additional investment and tax breaks the Government has committed to today is promising.

“Following today’s announcement, we need to now see a clear timing plan for the projects that the government intends to refocus on to boost the economy to reassure businesses and enable them to drive forward with confidence.”

Matthew Walters, head of consultancy and customer data services at LeasePlan UK, said: “As the Budget’s forecasts suggest, the recovery is going to be a demanding process.

“Of course, the fleet industry is ready to play its part in this effort, however long it takes.

"We won’t just supply the vehicles that Britain needs to get moving, but cleaner vehicles for a new green economy. We must seize this opportunity to build back better.

“One of the biggest rabbits that Rishi Sunak pulled from his hat was the Super Deduction: tax relief amounting to 130% of the cost of any investments in new equipment. This is likely to give a significant boost to business activity. 

“However, from the perspective of fleets and motorists, the Super Deduction is more of a Super Missed Opportunity. 

"The Red Book makes it clear that this only applies to plant and machinery. 

"I would urge the Chancellor to go further and extend this to both the cost of charge point installations and, more importantly, to the costs of grid and infrastructure upgrades where there is currently no relief.  

“Let’s see whether this is actually extended in the upcoming Finance Bill.

“The fuel duty freeze that has been in place for a decade now has been extended for another year. 

“But we ought to prepare for tougher measures in future. And the Chancellor ought to consider whether motorists really are the best people to face those tougher measures. 

"Although we understand the importance of rebalancing the public finances, there’s no point stunting the economic recovery before it’s even really begun.

“Last year’s Budget gave us something valuable: the rates of Company Car Tax up until 2024-25. But there’s still more that the Chancellor needs to confirm – and didn’t today. 

“Reviews had previously been established to look into how road taxes could better encourage the uptake of lower-emission vans and cars, but the final policies haven’t been announced yet. 

"With the 2030 ban on new petrol and diesel sales fast approaching, we need these sorts of policies in place as soon as possible.” 

Asphalt Industry Alliance (AIA) chair, Rick Green, said: “Our local road network has a vital role to play in supporting our communities and economic growth as we reset after the pandemic.

“What was needed from the Chancellor today was a five-year commitment to investing in local roads, to allow local highway authorities to plan ahead and implement a more cost-effective whole-life approach to upgrades and maintenance.

“It is completely counterproductive, just weeks after announcing a £500m pothole fund for the coming year, that local authorities are now finding out that other funding streams that they rely on to maintain their local road networks are already being cut.  

“We recognise difficult choices are having to be made at present, but this giving with one hand and taking away with another’ doesn’t make sense - it will only lead to deteriorating road conditions and a rising bill to put them right.”

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said: “It is positive that fuel duty will remain frozen for another year. This decision will benefit motorists and support personal mobility as more people return to work and seek to avoid public transport, giving greater importance to car ownership”.

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