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Hammond drives green car agenda

25th Nov 2016
Editor AccountingWEB
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Electric car charging station

Philip Hammond’s concessions for low emission vehicles and ring-fencing existing salary sacrifice schemes swerved his Autumn Statement away from putting the brakes on the company car.

The Chancellor pledged a £390m investment into electric, connected and autonomous vehicles, with £80m of that set aside for Ultra Low Emission Vehicles (ULEV) charging infrastructure.

Low emission vehicles will also benefit from 100% first-year allowances for workplaces that invest in charge points for electric vehicles. This incentive is available until the end of March 2019.

The government also spared ultra-low emissions that emit less 75g/km CO2 from its much anticipated salary sacrifice clampdown.

Existing company car arrangements made before April 2017 will be reprieved from the salary sacrifice changes until April 2021.

But Alastair Kendrick, company car tax expert from MHA MacIntyre Hudson, told AccountingWEB that when people start to analyse this sub 75g window they are going “to be somewhat disappointed” by the Chancellor’s concessions.

Although the anticipated salary sacrifice “shock and horror” had been taken away, Kendrick said the 75g concession will not be significant because “we don't have many vehicles that are within that range at the present time”.   

“Some of the hybrid cars are not particularly cheap to buy. So they wouldn't fall to your obvious choice within that type bracket.” He added: “The indication is that the company car tax is generally increasing,” said Kendrick. “So it's not the message the car leasing industry would have wanted.” 

The government will introduce 15 bands to categorise company cars and rates from April 2020-21 to “provide stronger incentives” for ULEVs. But the classification of what is an ultra-low emission vehicle will drop from 16% to 2% from 2020. The appropriate percentage for cars emitting greater than 90g CO2 /km will also rise by one percentage point.

Gerry Keaney, BVRLA chief executive, welcomed the government’s recognition that the company car market supports the take-up of ULEVs. “These new bandings will create a much greater incentive for employers and employees to choose the cleanest electric and hybrid cars.

But he added: “These decisions are pragmatic, cost-conscious ones and we are concerned that they may be deferred until the incentives come into effect. The ULEV market could suffer in the meantime as company car tax costs rise significantly between now and 2019.”

The freeze in fuel duty for the seventh consecutive year, however, offered solace to the motorists and company car users who were hit by the Chancellor’s salary sacrifice attack.

“In total this saves the average car driver £130 a year and the average van driver £350,” Hammond explained. “This is a tax cut worth £850m next year, and means the current fuel duty freeze is the longest for 40 years.”

 What do you think? Will Hammond’s concessions make any difference?

Replies (2)

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Should Be Working ... not playing with the car
By should_be_working
25th Nov 2016 12:14

"In total this [road fund licence freeze] saves the average car driver £130 a year"

"You see", said the mugger, "I was going to clean out your wallet this time, but I'm only going to take the same as during last week's beating, so you're actually better off!"

Do they really think people still fall for this rubbish?

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By David Heaton
25th Nov 2016 17:54

Has the pain for salary sacrifice drivers really been put off until 2021? 'Existing arrangements' surely means any car provided before April 2017, but as each lease runs out (which may be in 2018, not 2021) surely there's a new salary sacrifice offered for the next car?

And how will this affect aggregate emissions of the UK plc fleet? If I currently have a choice of £500 pm or one of a range of cars with a range of CO2 ratings that give a current scale charge of between £4k and £5k, but I know I'm going to be taxed on £6k come what may, why would I choose the 99g/km model over the more comfortable and powerful 130g/km model that's within my lease list price range?

It's clearly a tax-raising measure (£1bn over five years, according to the Green Book, and cars will be the biggest element), but there has to be a worry that the average CO2 rating for the UK fleet will rise as company car drivers stop worrying about the emissions and just look at what they can get for their money.

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