Activa Contracts

15 December 2016

ACFO calls for long-term planning as government seeks to reshape benefit-in-kind tax on ultra-low emission cars

Government should reveal company car benefit-in-kind tax rates on ultra-low emission vehicles (ULEVs) until 2028/29 to enable long-term fleet planning, while also recognising vehicle lifecycles and product availability, according to ACFO.

The UK’s premier fleet decision-makers’ organisation in responding to the government’s consultation on the design of benefit-in-kind tax bands for ULEVs from 2020/21 onwards, has called for a long-term plan and recommended eight years.

ACFO has also called for benefit-in-kind tax bands for ULEVs – currently recognised by the government as cars with carbon dioxide (CO2) emissions of 75g/km and below – to:

Company car benefit-in-kind tax rates to the end of 2019/20 are already published, but the government is seeking views on the shape of the regime from 2020/21 in its consultation document –‘Company Car Tax for Ultra-Low Emission Cars’.

ACFO says in shaping the new regime, the government must take into account next year’s introduction of the World Harmonised Light Vehicle Test Procedure designed to reflect real-world driving MPG and emissions which is expected to impact on existing new car figures. As a result, it is anticipated that fewer cars will meet the current 75g/km threshold to be classed as ULEVs.

The organisation also says the government should give thought to including other emissions, such as nitrogen oxide (NOx), in any new system and not only CO2 to help further air quality improvements.

ACFO has also suggested that recognition could be given to the variance between different fuel types powering cars – petrol, diesel, hybrid, plug-in hybrid, extended-range electric vehicles, pure electric and hydrogen – to recognise ‘the very different real world emissions that exist’.

Despite those suggestions, ACFO Deputy Chairman Caroline Sandall said: ‘The existing company car benefit-in-kind tax regime, which has been in place since 2002, is easy to administer and straightforward to understand for companies and employees alike. Therefore, ACFO would encourage a similarly simple band structure that is both fair and transparent for ULEVs from 2020/21.

‘Critically, ACFO believes that in order to continue to reduce emissions from vehicles and improve air quality, ongoing support through the tax system is required for ULEVs.

‘The breadth of product in the lowest emission tax bands has historically been limited and, whilst improving, a firm incentive-based long-term tax plan is required to ensure vehicle manufacturers produce ULEVs across a wide range of new car sectors and thus demand rises,’ said Ms Sandall.

‘Long-term planning is essential to motor manufacturers and fleets and it is only fair to company car drivers that they select vehicles in the full knowledge of what their tax bills will be for the full lifecycle of a vehicle. Currently tax levels are known for four years, but ACFO believes that is not long enough which is why we have called for eight years.’