Company car driver tax
Company car drivers facing mounting tax bills
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IT’S not easy being a company car driver.

Don’t get me wrong, having a company car is still a big benefit: someone else pays for your car, pays for your insurance, pays for your business fuel, provides another car when your car goes wrong.

Nothing too bad about all that.

All you do as a company car driver is pay the benefit in kind tax on it.

But recently, the government’s company car policy is in some disarray; the default company car fuel choice of diesel it has encouraged because of low CO2 emissions is now fingered as the culprit for 40,000 premature deaths and is being singled out for a toxicity tax for the capital city, London.

Encouragement to drive low emission cars – by way of reduced company car tax for such vehicles – has been gradually reduced. For a five-year period starting 2010-11, drivers of zero emission vehicles, such as the Nissan Leaf, were exempt from all company car tax.

And yet this year, the taxable percentage band is 9%; in 2018/19 it shifts up to 13%; and for 2019/20 it goes up to a thumping 16%.

Thanks government. So much for encouraging low or zero carbon driving.

  • End of road for petrol and diesel cars and vans, read this story here

For drivers of standard petrol or diesel cars the company car tax rises on the horizon are a little eye-watering at a time of reduced household expenditure.

If you drive a hatchback company car such as the Ford Focus 1.0t EcoBoost Zetec Edition 125PS model (108g/km) your company car tax this year is 20% rising to 26% by 2020/21. Ouch!

To be fair, HMRC has recognised it has got the Company Car Tax percentage banding structure terribly out of kilter, and from 2020/21, the company car taxation on a zero emission battery electric car falls back to 2%.

Nevertheless, it’s hardly surprising that many businesses are reconsidering their company car policies to lessen the financial burden on staff by offering cash for car alternatives.

Personal car leasing has seen an explosion in popularity – and part of the driver for this must be a consequence of the government’s clumsy and heavy handed company car tax policy. For more on this read 36% personal car leasing rise driving market growth.

So I have every sympathy for the British Vehicle Rental and Leasing Association’s (BVRLA) submission to the Chancellor. The BVRLA wants the Chancellor in his autumn budget to address some of these issues by skewing policy to support the company car market.

The BVRLA has explained to Chancellor Hammond the parallels between continuously rising company car tax and the upward trend of people taking cash allowances to finance their own vehicles, often through personal contract hire leases.

And that drivers should not be punished for choosing a diesel car, which still has a place for providing long-distance high mileage drivers with the most suitable transportation.

As Martin Brown, managing director of leasing provider Fleet Alliance explains:

“It’s important not to become too blinkered in the prevailing emotional anti-diesel mindscape. For fleets, a balanced view is what is required.

“Diesel still has an important place in any fleet but it’s critical to evaluate all cars to see where diesel is still relevant – or where a petrol or alternative fuel vehicle might fit in.”

Back to the BVRLA. It also wants time to adjust to the new WLTP (Worldwide harmonised light vehicles test procedure) before basing any CO2 related taxes on the new testing system:

“We would recommend that all CO2 related taxes continue to use the existing NEDC CO2 values until April 2021,” BVRLA chief exec Gerry Keaney says.

Other points the BVRLA makes, are:

  • The average new company car has lower carbon emissions than the average new car. Tax hikes have exacerbated this and former company car drivers take to personal car leasing.
  • The Chancellor should consider the economic and political consequences of squeezing more tax from diesel company car drivers, often essential business users, driving cars fitted with the latest cleaner diesel engine technology.
  • The majority of the 4.4million commercial vehicles on the road are powered by diesel technology, so diesel still has an important role to play:
  • Review of the VED regime (road tax) to encourage the selection of the cleanest and greenest cars
  • Bring forward the introduction of the 2% zero emission band for the company car tax regime to 2018/19
  • Enhanced capital allowances for leased commercial vehicles
  • Change to VAT rules to allow full reclaim of VAT on electric vans with a payload of less than one tonne

The Chancellor should take note. We all want cleaner air. But beating the company car driver over the head with a big stick is not getting the desired results.

So Mr Hammond: more encouragement and enticement please. Put the stick down.

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