IT might have been a Budget to end austerity, but company car drivers won’t be feeling any benefits. Austerity will continue for them.
It was widely hoped that the Chancellor would bring forward the 2020/21 company car tax bandings to encourage the take up of ultra low emission vehicles.
This has not happened.
Instead, Chancellor Philip Hammond did announce that Company Car Tax would be based on WLTP (Worldwide harmonised Light vehicles emissions Test Procedure) figures from April 06, 2020.
The effect of this measure is likely to increase Company Car Tax for drivers, as WLTP emission figures tend to be higher.
However, the Government did promise it would review the impact of WLTP emission figures on Benefit in Kind (BIK) Company Car Tax.
For information on WLTP and what it is, click here
The Chancellor also announced that for cars registered prior to 6 April 2020, HMRC would continue to use the current New European Driving Cycle (NEDC) test procedure for the purposes of collecting company car tax.
Paul Hollick, Managing Director of fuel management specialists TMC, commented:
“As if anyone needed reminding what a disaster WLTP has proved to be, the chaos has now bitten the Budget. I’m pleased to see the Treasury will review the impact of WLTP on company car tax (CCT). But since it would be illogical to announce BIK rates for 2021/22 until after the review, it means there’s no hope of clarity until next Spring at the earliest.
“This now means that any employee choosing a company car now is still taking a gamble on how much tax they pay in year three.”
“That’s bad news all round, not only for the fleet industry and its customers but also for the government’s low carbon transport plans, if employees opt out of company cars into older vehicles. The Treasury and HMRC really have to get a firm grip on CCT before Brexit overwhelms them.”
Chief Executive Gerry Keaney from the the British Vehicle Rental & Leasing Association (BVRLA), the UK trade body for companies engaged in vehicle rental, leasing and fleet management, added:
“It is great to hear that the Treasury is making plans to remedy any potential tax distortion caused by the transition to the new WLTP emissions standard in April 2020.
“It is vital that fleets and company car drivers are able to plan for the future, confident that they are working with more accurate emissions information and a fairer tax regime that rewards those who choose cleaner vehicles. These revised tax bandings can’t come too soon.”
Uncertainty could push drivers away from company cars
The largest leasing company in the UK, Lex Autolease, suggested that the unintended consequence of the Budget would be to push drivers away from the company car.
Paul Lippitt, Principal Consultant at Lex Autolease, said:
“Facing increased costs if company car drivers renew their contracts, more employees might be pushed towards a less-regulated grey fleet environment, where higher emissions and safety issues create new challenges and the uptake of alternative fuels is delayed.
“In this Budget, we would have welcomed an announcement of steps being taken now to manage the tax implications for both businesses and drivers, which would encourage them to make the move to newer, cleaner vehicle technology. It is positive that more clarity will come in spring, but the uncertainty in the interim will make it difficult for drivers and fleet decision makers to plan for the future.”
For the current company car tax tables, click here
John Webb, Principal Consultant at Lex Autolease, added:
“The lack of long-term BiK tables is a key factor that’s holding the market back.
“Before fleet decision makers can build a strategy based around the average 48-month contract, and before employees can commit to what is essentially a four-year investment, they need assurance that the associated costs are not going to increase over its lifetime.
“There has been a lot of noise about the increased availability of WLTP data causing indecision, but until fleets and drivers understand how it will impact BiK taxation and ultimately affect their finances, it is of little value to them.”
“Orders for diesel vehicles are being delayed in case any further tax increases are announced which could make them prohibitively expensive.
“Equally, the question over whether tax incentives will be maintained for electric vehicles will determine whether and when the immediate investment in an Ultra Low Emission Vehicle fleet will pay off.”
The Government said it would also review the effect of WLTP on Vehicle Excise Duty (VED).