12 October 2018

Chancellor urged to support the company car and align 2018 Budget to EV aims by vehicle leasing industry

Chancellor of the Exchequer Philip Hammond has been urged to support the vital role played by the company car and energise the take up of plug-in electric vehicles in the 2018 Budget on October 29.

The call has come from the British Vehicle Rental and Leasing Association (BVRLA) in the wake of the Prime Minister using the recent inaugural Zero Emission Vehicle Summit in Birmingham to launch her bid for the UK to become a global centre of excellence for electric vehicles.

However, the BVRLA said the government risked losing the zero-emission momentum unless it could deliver a fairer and well-signposted company car benefit-in-kind tax regime.

Its current plans would see the benefit-in-kind tax rate for electric company cars soar to 16% in April 2019 before dropping to 2% the year after, actively disincentivising the take-up of those cars and contradicting its ambitions, said the BVRLA.

By bringing forward the 2% benefit-in-kind tax rate for zero emission vehicles, the government could provide a much-needed stimulus to the electric vehicle market, which was currently growing at less than 4% per year, said the organisation.

BVRLA chief executive Gerry Keaney, who called taxing electric cars at 16% "madness.", said the majority of electric vehicles would be company cars and businesses could only deliver the required increases in demand to meet government aspirations for a zero-emission culture if they had “an enabling tax environment”.

Plug-in vehicles are not yet appropriate for all trips and the BVRLA is also calling for the Treasury to support the use of low-emission petrol and diesel company cars. It has also asked the government to address the introduction of the new Worldwide Harmonised Light Vehicles Test Procedure (WLTP) emission standard, which could see some benefit-in-kind tax rates increase by as much as 30%.

"The tax burden on company car drivers has already risen by £1 billion over the last five years," said Mr Keaney.

"HM Revenue and Customs’ most recent estimates show a continued fall in the number of company car drivers. More than half of company car drivers say that their vehicle is an essential tool of the job - not having one isn’t an option.

"Large numbers of people that used to get a company car as a perk or employee benefit are now opting out because of the rising tax cost. They are taking cash instead and the evidence suggests that they are spending this on older and more polluting vehicles.

"It is vitally important that the Chancellor seizes this tremendous opportunity to support the future of the company car by using this month’s Budget to rein in these unhelpful tax hikes."

The BVRLA has written to the Chancellor urging him to:

  • Freeze company car benefit-in-kind tax at 2018/19 rates
  • Eliminate unintentional tax increases arising from the transition to WLTP
  • Bring forward the 2% company car benefit-in-kind tax threshold for zero emission vehicles to 2019/2020
  • Publish a four to five-year view of future company car benefit-in-kind tax bands.