According to the Centre Forum a think tank appointed by the Government to look into a reform of the VED system, a ‘pivot point’ would exist, where models above the 1% of lowest emission cars bought the year before would see a charge per g/km that could be between £35 to £50 per g/km. The plan claims cost neutrality, but with expenditure loaded at the front end.

On company cars, the Centre Forum report said the initial charge would be included in the BiK liability.

It claimed: ‘This reinforces the incentive towards low emission vehicles. Since the aim is to make the proposal revenue neutral, we balance this by reducing the benefit in kind percentage liability for cars with average or below average emissions.

‘The government does not publish the distribution of emissions for new company car sales, but on the basis of overall car sales, and an understanding of the market, it seems likely that revenue neutrality would translate into a 3% point fall in the benefit in kind percentages for cars with emissions of 135g or lower.

‘We can see the effect by considering the lucky 40% taxpayer offered a BMW 3-series costing no more than £28,500. This budget gives them the choice of the 320d “efficient dynamics” (109g) or the 320i “luxury” (147g). At present, opting for the higher emission model increases the tax payable by £49 per month: this proposal raises that to £92 a month. In absolute terms the BIK charge also falls for the lower emission car, it creates a greater incentive for company car owners to select low emissions vehicles – and thus incentivises manufacturers of cars sold in large numbers to fleets to produce such cars.’

The think-tank claims the plan does not make it more expensive – on average – for a company car driver to run a car, and would reduce the tax liability for low emission cars.

It added: ‘There is no reason to think that this proposal will reduce company car sales: the sales of high emission cars will fall, but the sales of low emission cars will rise. It is

likely that there will be no change in the sales of cars to this sector of the economy.’