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Spring Budget 2020: The main points for fleets

It may have been dubbed the ‘coronavirus Budget’, but for fleets and drivers the news was, on the whole, positive and designed to help with the shift to electric cars, but with a few areas of disappointment.

The industry is calling for a fair approach to the treatment of CCT and VED

The Budget provided a number of welcome news announcements for fleets

Company car tax rates

The Budget provided long-awaited confirmation that the company car tax rates announced last year will go ahead as planned for the next three tax years, while also setting out rates for two further years.

It means that fleets can plan ahead with confidence in the rates, which were set out in July 2019 as a result of the WLTP consultation and see all zero-emission company cars, regardless of whether they’re registered before or after the new tax year, attract a reduced appropriate percentage of 0% in 2020-21 and 1% in 2021-22, before returning to the planned 2% rate in existing legislation in 2022-23.

Although the rates had been set out last summer, there had been some concern over their adoption when the Autumn Budget was shelved for the election campaign.

And for cars registered between 1 October 1999 and 5 April 2020 inclusive, the Government has again clarified that the CO2 emissions figures for company car tax and related charges will continue to be based under the New European Driving Cycle (NEDC) procedure on NEDC Correlated figures.

In a surprising but welcome move, the Government also confirmed that all rates will be frozen at 2022-23 levels for an additional two years.

BVRLA chief executive Gerry Keaney said: “Having a roadmap for the future of company car tax up to 2025 removes the uncertainty that we know stifles business decisions.”

There was also news on capital allowances for business cars, which are now being extended to cover the April 2021 to April 2025 period, and the lease rental restriction.

The Government also said it would eliminate the Van Benefit Charge for zero-emission vans from 2021.

Read more here.

Plug-in Car and Van Grants

Although the Budget initially announced that the Plug-in Car and Van Grants would continue until March 2023 – backed by a total £532m funding package and putting paid to speculation they would be axed – a supplementary note issued later by the Department for Transport and Office for Low Emission Vehicles clarified funding levels for cars would be reduced.

It means that, with immediate effect, the grant funding for cars will fall to £3,000 compared to the previous level of £3,500 – effectively raising the cost of electric vehicles for drivers and fleets. Meanwhile, cars costing £50,000 or more will no longer be eligible for the funding at all.

The grants to support the purchase of zero-emission vans, taxis and motorbikes will remain at the same rate as before.

Caroline Sandall, chairman, ACFO, said: “Whilst ACFO welcomes the overall Budget Statement, any erosion of the benefits of electric vehicles will impact uptake and this £500 cut goes against the raft of ‘green’ motoring-related initiatives contained in various announcements by the chancellor.

“The Budget Statement made great play on the Government ‘getting things done’ and it being a ‘Budget that delivers in challenging times’. Well, this cut to the Plug-In Car Grant makes a swathe of electric vehicles more expensive and thus dilutes the benefits.”

Read more here.

Vehicle Excise Duty

Providing a further incentive for drivers and fleets to switch to electric cars, the chancellor announced that zero-emission cars will be exempt from the Vehicle Excise Duty (VED) ‘expensive car supplement’ until 2025.

As such, EVs costing more than £40,000 will be saved from having to pay the £320 ‘expensive car supplement’; as it was the only road tax that fully electric cars were subject to, it means they’re now VED exempt.

In addition, the Budget announced the publication of a call for evidence on VED, as revealed last year, which will include how it can be further used to reduce vehicle emissions.

Read more here.

Investment in fast charging

Alongside the company car tax and VED measures intended to encourage electric vehicle take-up, the chancellor also pledged £500m for the rollout of a fast-charging network for electric vehicles.

This is intended to ensure drivers will never be further than 30 miles from a rapid charging station – a point made in the Conservatives’ election manifesto – and will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid.

And to target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.

Matthew Walters, head of consultancy at LeasePlan UK, said: “We know that fleets and motorists are keener and keener to go electric, but many remain worried about the availability of chargers. Allaying these fears is crucial for the country to progress along the Road to Zero.”

Read more here.

Potholes and road funding

The Budget also earmarked a £2.5bn pothole funding package and £27bn; the latter marking the ‘largest-ever’ roads investment

The second Road Investment Strategy (RIS2) covers the period up to 2025 and will take forward schemes such as dualling the A66 Trans-Pennine and upgrading the A46 Newark bypass, and building the Lower Thames Crossing.

The Budget also sets store for urban transport, including confirming allocations of over £1bn from the Transforming Cities Fund. And the Government will also provide £4.2bn from 2022-23 for five-year funding settlements for eight Mayoral Combined Authorities.

The chancellor additionally pledged an extra £2.5bn for local road maintenance, spread over the next five years and enabling local authorities to fix up to 50 million potholes and undertake longer-term road resurfacing works, and to provide £304m to help local authorities reduce nitrogen dioxide emissions and improve air quality.

Matthew Walters, head of consultancy at LeasePlan UK, said: “With the UK’s road infrastructure ranked just 36th in the world, well behind comparable economies, it’s clear that improvement is needed. This extra spending will help businesses and individuals who are fed up with the damage and delays caused by substandard highways.”

Read more here.

Fuel duty

A populist move will see fuel duty remain frozen for a further year, despite concerns from some groups over the impact on congestion and the environment.

Sunak said he had heard representations that the Government could no longer afford to freeze fuel duty and added that he was “certainly mindful of the fiscal cost and the environmental impact” but committed to maintaining the freeze for a further year. This staves off the scheduled 2p-a-litre tax rise due at the pumps in April 2020 and sticks to promises made by Boris Johnson in his pre-election press conference.

Ashley Barnett, head of fleet consultancy at Lex Autolease, said: “While the ultimate goal is to remove traditionally fuelled vehicles from our roads, it can’t happen overnight, as too many people are reliant on a private vehicle for their way of life, and can’t currently afford an EV. As the momentum shifts away from petrol and diesel, there will come a time where an increase in fuel duty is appropriate and will help fund investment in greener alternatives.”

Read more here.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.