Budget 2014: What’s in it for you?
Fuel Duty Freeze:
Previously announced in the Autumn Statement, this was confirmed. However, there were no signs of the much called for cut in fuel duty, bringing condemnation from the RAC on what it termed as ‘effectively a tax on virtually every British business that uses vehicles’.
Outcome: No change for now but still uncertainty for the future – a cut in fuel duty would enable fleets to plan ahead to utilise the cash flow boost.
Company Car Tax (CCT):
The Chancellor announced a 2% increase in Benefit in Kind (BiK) tax for 2017-18 and 2018-19. The move means that the CCT bands for cars emitting over 75g/km will increase 2% to a maximum of 37% for both these years.
As a result of the changes, the differentials between the three bands below 95g/km will narrow although this will happen one year later than previously announced. In 2017-18 there will be a 4 percentage point differential between them, reducing to 3 percentage points in 2018-19 and 2 percentage points in 2019-20 in line with the Budget 2013 announcement.
The rates mean that low-emission cars, such as EVs, with emissions up to 50g/km, such as an electric car, will see a series of stepped increases, from paying 0% Benefit-in-Kind tax in 2013/14 and 2014/15 to 5% in 2015/16, 7% in 2016/17, 9% in 2017/18 and 13% in 2018/19.
Outcome: The delayed increase in the BiK rates for low and zero-emission vehicles is helpful but fleet drivers/fleets will still see a sharp rise in BiK/Class 1A NIC from next year. However, the move to a five-year BiK announcement cycle at least brings certainty to fleets looking to plan ahead – particularly those running vehicles on longer replacement cycles.
Tax breaks for zero emission vans have been extended under the Government’s Enhanced Capital Allowance (ECA) scheme.
The scheme, launched in April 2010, means businesses are able to claim for the cost of purchasing goods vehicles operating with zero emissions and had been due to expire in March 2015. However, the scheme will now be extended until April 2018 but will only be available to businesses that do not claim the Government's Plug-in Van Grant.
Outcome: A welcome break for fleets running zero-emission goods vehicles.
Fuel Benefit Charge (FBC)
On 6th April 2014 the car and van fuel benefit charge multipliers will rise to £21,700 and £581 respectively, and will increase again, in line with inflation from 6th April 2015.
Outcome: This will put increased pressure on fleets and drivers to turn away from free private fuel as it increasingly becomes a false economy. For fleets/drivers not using “free fuel”, it will also put the focus keeping accurate and detailed records of private mileage so the employer can demonstrate that all fuel for private mileage is refunded to the employer.
Van Benefit Charge (VBC)
The first increase in the VBC since 2008 will take effect from 6th April 2014 when it will rise to £3,090. It will increase again, in line with inflation from 6th April 2015. Vans with zero emissions will be taxed with effect from April 2015, but the full van benefit charge will not apply until April 2020, as the charge will be phased in gradually.
Outcome: Increased costs for both employers offering and employees using vans on private journeys. For those not paying VBC, there will be the same pressures as before, for both employers and employees, to be able to prove this to HMRC if needed.
The Chancellor also announced that, in response to the OTS review of employee benefits and expenses, the Government would consult on four simplifications including abolishing the £8,500 threshold, voluntary payrolling of benefits, a trivial benefits exemption and a general exemption for non-taxable expenses.
Outcome: 'Although these measures should reduce the burden of administration placed on employers, they fall short of the radical long-term measures designed to dramatically simplify employment tax compliance suggested by the OTS,' said Jeff Whitcombe, BCF Wessex.
Vehicle Excise Duty:
The Chancellor also announced that Vehicle Excise Duty (VED) rates for cars, motorcycles and the main rates for vans will increase by inflation from April 2014 when a rolling 40-year exemption will be introduced for classic cars. He also confirmed that as announced at Autumn Statement 2013, motorists would no longer need a paper tax disc with effect from 1 October 2014.
Outcome: Increase in VED rates will come as no surprise – further incentivising fleets to cut bills by opting for lower-emission vehicles. However, abolition of paper tax disc will, says the BVRLA, save the Government around £3m a year with savings of £10m for fleet operators.