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Government indecision driving employees out of company cars

The Government has come under fire from the ICFM and BVRLA after yesterday’s Spring Statement failed to provide much-needed clarity on future company car tax (CCT) rates, including addressing issues from the introduction of WLTP.

Paul Hollick, ICFM chairman

The Spring Statement had been widely expected to provide an ‘indication of travel’ for CCT going forwards following the recent WLTP consultation, which looks at the impact that the new emissions testing cycle will have on company car tax and vehicle excise duty (VED) when it is implemented for tax purposes from April 2020. The more accurate testing procedure is expected to increase most cars’ reported CO2 figures by 10-20%, impacting on emissions-based CO2 taxes like CCT and VED. Fleet organisations including the ICFM have also been urging the Government to publish CCT rates for 2021 onwards, to help fleets and drivers choose company cars with full insight into their tax costs going forwards.

However, no announcements on company cars were made in the Spring Statement; instead the Government said a response on WLTP is due in the coming months.

This means fleets continue to be left in the dark, risking more drivers opting out in higher-polluting – and possibly higher-risk – private cars. The last set of Benefit in Kind statistics from the Government show 940,000 drivers paid BiK on a car in 2016/17 – a decline of 20,000 drivers compared to the previous year.

It also means the Government has precious time left to sort out any changes to the current system in time for the April 2020 deadline. HM Treasury has previously outlined that if revisions to the vehicle tax system are required, these would be introduced into the Finance Bill 2019-20, with draft legislation being published for technical consultation ahead of that.

Commenting on the continued delay on CCT insight, Paul Hollick, ICFM chairman, said: “On behalf of all fleet decision-makers and company car drivers, the ICFM is hugely disappointed that Chancellor of the Exchequer Philip Hammond did not use the Spring Statement to bring clarity to company car benefit-in-kind tax from April 2020 and beyond.

“Promising to publish details ‘in the coming months’ on what is a fundamental issue for all fleets merely continues the uncertainty that is crippling decision-making.

“It is clear that the Chancellor, ministers and HM Treasury, has become completely blindsided by Brexit and seem incapable of making decisions on many issues, including future company car benefit-in-kind tax rates.

“In terms of overall taxation, company car Benefit-in-Kind tax may only be a relatively small issue. However, almost one million employees pay Benefit-in-Kind tax on company cars, according to HM Revenue and Customs’ figures, and sales of cars to fleets are critical for motor manufacturers.

“The fleet industry, indeed the entire motor industry, cannot afford for the Government to continue to drag its feet on an issue – WLTP-based taxation – the introduction of which it has known about for years and should have been planning for.

“The Government continues to preach about requirements to improve air quality and reduce transport emissions, and fleet decision-makers acknowledge that businesses have a crucial role to play in decarbonising.

“However, all the good work that fleets have done in recent years in that area is unravelling because the Government cannot tell the industry what company car Benefit-in-Kind tax rates based on WLTP-produced emission figures will be from April 2020.

“Government indecision is delaying the acquisition by fleets of new cars featuring the very latest emission-busting engine technology and, in some cases, driving employees out of company cars and into privately-funded older and more polluting vehicles.”

The BVRLA also highlighted how failure to have clarity on a future tax strategy will cause uncertainty for thousands of fleets and company car drivers, which is damaging to both the economy and the environment.

BVRLA chief executive Gerry Keaney said: “In our recent meetings with Treasury, Department for Transport, BEIS and Downing Street officials, we have emphasised the importance of getting the tax system right and have made clear what the adverse impact will be on our sector if they fail to address vehicle taxation, particularly relating to WLTP.

“Although it is frustrating that we must continue to wait for further clarity, we will use that time to continue to campaign for a swift, tax-neutral and well-signposted approach, that recognises the vital role that company cars and fleets play in reducing road transport emissions and delivering the Government’s Road to Zero.

“Together with our fleet industry colleagues we were able to produce over 150 responses to the initial WLTP consultation. Now we are urging fleet industry colleagues to continue the campaign by writing to ministers or their local MP. You can do this via the campaign page on our website.”

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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.