What could be in Chancellor Sajid Javid’s Budget box for fleets?

Budget Day is Wednesday, March 11 and fleet chiefs are hoping for a raft of measures that will signpost the fiscal way forward and end the Brexit-inspired paralysis that has hampered Government decision-making in the past 12 months.

There has not been a Budget since October 2018 – there was a Spring Statement in March last year and company car benefit-in-kind tax rates for 2020/21 to 2022/23 inclusive were announced in July.

However, those rates have yet to be enshrined in law as neither an autumn 2019 Budget nor the resulting Finance Bill materialised due to the House of Commons being dominated by Brexit debate and then a general election being held prior to Christmas.

Now, with the Conservative Party enjoying a substantial majority in the House of Commons, a raft of measures could be announced in Chancellor of the Exchequer Sajid Javid’s forthcoming Budget to “get Britain moving” and that will impact on fleet operations.

First of all, fleet decision-makers will be hoping that the already announced company car benefit-in-kind tax rates for 2020/21 and the following two tax years will be confirmed and then be ratified in legislation. After all, as the Budget is less than a month before the start of the next fiscal year fleet chiefs and company car drivers will have made vehicle decisions based on an expectation that what was announced last July will not be changed.

As announced, for 2020/21 and 2021/22 separate company car benefit-in-kind tax rates will apply depending whether a vehicle was first registered before or after April 6, 2020 before realigning in 2022/23 – see http://www.fleetservicegb.co.uk/new-company-car-tax-regime/.

Furthermore, to enable fleet bosses and company car drivers to plan for the future, industry organisations have called on the Chancellor to announce benefit-in-kind tax rates for at least the following three tax years.

They point to the fact that many fleets and company car drivers now run vehicles for four years and into a fifth so it was only fair that they knew what the tax burden was for the whole fleet life of a vehicle.

Additionally, they want the Chancellor to confirm that the company car benefit-in-kind tax schedule for pure electric vehicles – 0% from 2020/21 – and plug-in models will be maintained at the levels already announced beyond 2022/23 for several more years to enable the embryonic sector to become established.

It is also hoped that the Chancellor will provide much greater clarity around the timescale for sales of new petrol and diesel cars and vans to be axed with 2030, 2035 and 2040 all dates that are possible.

As one industry expert said: “We know that the Government is driving fleets and consumers down the electric vehicle road, but to date there remains a vagueness about the details as to how the Government intends to improve air quality and its targets.”

Look out also for the Chancellor to announce a shake-up in Vehicle Excise Duty on light commercial vehicles. In 2018 the Government published a consultation on reform exploring the creation of a graduated first year rate for new vans, as is already in place for cars. It would replace the current flat rate regime.

In the 2018 autumn Budget, the Government announced that based on the consultation responses it was looking at:

  • Further developing its understanding of the impacts of Worldwide harmonised Light vehicles Test Procedure (WLTP) on carbon dioxide (CO2) emissions for vans, ahead of announcing the new rates and bands
  • Ensuring the new system took into account the weight of a van by introducing a two-category approach
  • Providing ongoing incentives, beyond the first-year, for new zero emission, ultra-low emission and other alternatively fuelled vans.

Since then there has been silence from HM Treasury. However, at the time the Government said it was aiming to introduce the new Vehicle Excise Duty system in April 2021.

Calls have also been made in the run-up to the Budget for the Chancellor to scrap VAT on the sale of electric cars.

The demand came from the AA, which also wants VAT to be scrapped on monthly lease rentals and the premium Vehicle Excise Duty (VED) rate, applied to vehicles with a list price in excess of £40,000, to be removed from electric vehicles to encourage uptake.

The motoring organisation says that as the £320 a year Vehicle Excise Duty supplement is only applied in years two to six of a vehicle’s life, the change would have a “positive impact” on the sale of used electric vehicles.

AA president Edmund King said: “The UK car parc needs a shock to the system. Eight out of 10 drivers say improving air quality is important to them, but they are confused by current policies and as such many have stuck with older, more polluting cars.

“With electric vehicles making up just 0.2% of the nation’s cars, there is a long way to go to meet the official target of at least half new car sales to be ultra-low emission by 2030. Our proposal would help to achieve that goal more quickly.”

He concluded: “Drivers want to amplify their wishes to go electric. We hope by plugging this idea the country will unite and deliver positive change.”

Additionally, the British Vehicle Rental and Leasing Association (BVRLA) and more than 20 other organisations have joined forces to call on the Government to pledge its continued support for the Plug-in Car and Van Grants.

Currently there is no commitment to continue the grants – £3,500 for a zero emission car and £8,000 for a plug-in van beyond 2020.

BVRLA chief executive Gerry Keaney said: “Fleets are in a unique position to accelerate the shift to more sustainable road transport, but we need the right incentives in place and the Plug-In Grants are crucial.”

The BVRLA also wants to see a re-introduction of the Plug-In Grant for hybrid electric cars at least as a short term measure, particularly with supply constraints on 100% electric vehicles extending, in some cases, to nine months and even longer.

There has also been a repeat of the annual pre-Budget calls for contract hire and leasing companies to benefit from 100% first year capital allowances on electric and ultra-low emission vehicles and the lease rental restriction on those models to be abolished, which would enable suppliers to cut monthly lease rates if the tax savings were passed on to customers.

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