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Spring Statement: Government announces environmental measures but no decision on company car tax

Fri 15 March 2019 | Back to news list

In his Spring Statement the Chancellor Philip Hammond announced a range of measures to support the Clean Growth Strategy and 25 Year Environment Plan. The Government introduced the Future of Mobility: Urban Strategy alongside the Spring Statement but there was little specific mention of road transport in the Statement itself. Fleet-focused commentators were disappointed that the Chancellor did not add clarity to the future of company car taxation.
Amongst a range of 'clean growth' measures, the Chancellor announced that to help meet climate targets, the Government will advance the decarbonisation of gas supplies by increasing the proportion of green gas in the grid, helping to reduce dependence on burning natural gas in homes and businesses.
The Statement also announced Government plans to launch a call for evidence on Offsetting Transport Emissions to explore consumer understanding of the emissions from their journeys and their options to offset them. This will also look into whether travel providers should be required to offer carbon offsets to their customers
With the Spring Statement, the Government introduced the Future of Mobility: Urban Strategy – a publication setting out the Government’s approach to putting the UK at the forefront of mobility, and responding to the significant changes taking place in transport technology – such as the growth in electric vehicles, the development of self-driving vehicles and advances in data and internet connectivity.
The Government said it will publish in the coming months its plans for Worldwide harmonised Light vehicles Test Procedure (WLTP) and vehicle taxes following the review into the impact of the WLTP on Vehicle Excise Duty and company car tax.
In response to the Spring Statement, Matthew Walters, head of consultancy LeasePlan UK (quoted in Fleetpoint) said: “The new emission testing regime – also known as WLTP – is an important part of the shift to greener motoring. However, its staggered integration into the tax system has created a lot of confusion and concern for fleets and their drivers. The use of NEDC-correlated figures, until WLTP figures apply from April 2020 onwards, means that some motorists are facing unexpected tax hikes.
“Thankfully, with the review he announced at last year’s Autumn Budget, the Chancellor has shown that he is listening to the fleet industry’s concerns – although we don’t yet know how he is acting. In a Written Ministerial Statement (WMS) published alongside today’s Spring Statement, Philip Hammond confirmed that the review’s conclusions will be revealed in the coming months.
"There is one big announcement that he should have made today but didn’t: the rates of Company Car Tax for 2021-22 and 2022-23. It’s outrageous that we weren’t told these rates years ago, and yet we’re still waiting. This means that fleets and motorists cannot properly prepare for the years ahead, which is particularly worrying at a time of such economic uncertainty. The Chancellor needs to reveal the rates as soon as possible – preferably even ahead of this summer’s draft Finance Bill.”
Paul Hollick, ICFM (Institute Of Car Fleet Management) chairman said: “It's hugely disappointed that the Chancellor did not use the Spring Statement to bring clarity to company car benefit-in-kind tax from April 2020 and beyond.
“In terms of overall taxation, company car benefit-in-kind tax may only be a relatively small issue. However, almost one million employees pay benefit-in-kind tax on company cars, according to HM Revenue and Customs’ figures, and sales of cars to fleets are critical for motor manufacturers.
“Government indecision is delaying the acquisition by fleets of new cars featuring the very latest emission-busting engine technology and, in some cases, driving employees out of company cars and into privately-funded older and more polluting vehicles.”
Ashley Barnett, Head of Consultancy at Lex Autolease added: “As we move from New European Driving Cycle (NEDC) values to NEDC-derived and ultimately to the exclusive use of WLTP, vehicles’ fuel consumption and emissions values are effectively increasing, which has tax implications for businesses and individual drivers.  We look forward to reading the government’s response to the outcomes of the WLTP consultation, and hope that the need to manage the impact of WLTP on Vehicle Excise Duty (VED) and company car tax will be recognised.
“Without guidance on how WLTP will affect company car tax rates, we run the risk of contract holders deciding not to renew, and more people opting out of their company car schemes in favour of a less-regulated grey fleet environment.  Fleets have a critical role to play in pioneering the newest, cleanest vehicle technology, so it’s important that the knock-on effects of the WLTP transition don’t make company vehicles seem like a less attractive option.
"Questions remain over the future tax treatment of electric vehicles, which makes it difficult to forecast the cost of transitioning to an ultra-low and zero emission fleet. It’s positive that grants are still available to reduce the upfront cost of eligible pure electric vehicles, more clarity is needed – in particular to help drivers understand what the managed exit from the grants will look like, and how it might affect them financially.  
A Greenpeace statement said: "Tackling the climate emergency demands much bigger thinking. Issues like the shoddy state of our existing housing stock and rapid adoption of electric vehicles require serious money behind serious policies. A good start would be banning the sale of new petrol and diesel cars and vans by 2030.
"Equally, when compared to ideas like frequent fliers paying more and more heavily for trips abroad, carbon offsetting transport falls very short. Paying lip service to action, and piecemeal measures are no longer an option. It’s time for strong words to be matched with strong action."

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