Pre-Budget Report analysis
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Earlier this month, Alistair Darling, the Chancellor of the Exchequer, announced his Pre-Budget Report, which has a number of implications for company car drivers, fleet managers and other sector participants.
Perhaps the most wide-ranging announcement made by Mr Darling is that the VAT rate will return to 17.5% on January 1st 2010, having sat at 15% since it was lowered in the last Pre-Budget Report as part of plans to boost the ailing economy.
Due to the nature of VAT, this return to normal levels will affect everything from fuel to the cost of vehicles and parts.
Regarding fuel, the chancellor also asserted that duty on the substance will increase next year, as planned. Mr Darling also ruled out any additional increases to this levy, other than those that have already been announced.
These rises comprise a rise of 1p per litre in real terms on April 1st every year from 2010 to 2013.
Additionally, the duty differential for biofuels is set to end from April 1st 2010. However, this will not apply to all biofuels as those that are created from cooking oils will see the differential continue for two more years.
Several environmentally-focused announcements also featured in the Pre-Budget Report, such as the declaration that the CO2 emissions thresholds for company car tax bands will be reduced from 2012. The drop will be of five g/km.
In addition to the alteration in the thresholds, the graduated table of company car tax bands is set to be extended. It will feature a new 10% band for motors that emit up to 99 g/km. This replaces the existing 10% band.
"The company car taxable benefit arising for an employee is based on the list price of the car multiplied by a percentage - with the relevant percentage depending on the car's CO2 emissions," said Dan Rees, tax expert at Deloitte, speaking to online resource Fleet News.
He noted that the lowest rate currently stands at 15%, unless the car in question is a qualifying low-emission car (Qualec) and also has emissions of no more than 120 g/km of CO2. If this is the case, then the percentage is ten per cent.
"From April 6th 2012, Qualecs will no longer exist as a separate category but the lowest 10% rate will be available for cars with emissions of no more than 99 g/km of CO2," Mr Rees told the site.
The chancellor's Pre-Budget Report also confirmed companies that put electric vans into their fleets will be able to enjoy 100% writing down allowance.
This, according to Dan Jenkins of Smith Electric Vehicles, means that businesses that buy an electric van will be able to write down the total cost of the motor against tax during the first year of ownership.
Also speaking to Fleet News, he noted that this is important because sales of electric vans have been slow due to the fact that they are produced in relatively low volumes, which creates a certain amount of expense. He said that the announcement means that, as well as creating and supporting "green collar" jobs, which is a priority for the government, businesses will be able to purchase a viable, operational electric van in the very near future and enjoy tax breaks in the process.
Finally, Mr Darling announced that the fuel benefit charge multiplier will be increased in order to support public finances and promote fuel efficient travel. The multiplier will rise from £16,900 to £18,000 as of April 6th next year.
Paul Hollick, general manager sales development for Alphabet, told Fleet News: "For firms that still give drivers free fuel - and therefore both pay for the fuel and the employer's NIC on the benefit charge - this is good reason to think about buying drivers out of this benefit next year."
