Government provides welcome boost to the company car market

BVRLA Director of Policy and Membership, Jay Parmar

The BVRLA has welcomed today’s announcement from HM Treasury confirming the government’s decision to freeze company car tax. A move set to benefit just under a million company car drivers.

Those with vehicles registered before 6 April 2020 will see their company car tax bands being frozen at the 2020/21 rates until 2022/23. Those registering new cars after 6 April 2020 will also be rewarded with a two-percentage point tax cut. It will also see all zero-emission company cars paying no tax.

After the two-percentage point decrease in 2020/21, CCT rates will then increase by one percentage point in 2021/22 and 2022/23.  The government has also confirmed that it will aim to announce appropriate percentages at least two years ahead of implementation to provide certainty for employers, employees and fleet operators

The announcement came in the government’s response to the recent Review of WLTP and Vehicle Taxes following an extensive consultation with industry, taking in the views of BVRLA members and other industry colleagues seeking support for the company car market.

As well as providing a welcome boost to company car drivers, Treasury has also acknowledged the value of the company car market in supporting the transition to zero emission technology.

BVRLA Director of Policy and Membership, Jay Parmar said: “The Government has responded positively to the Company Car Tax campaign mounted earlier this year by the BVRLA, its members and fleet industry colleagues. Our regular engagement with policymakers is clearly paying off as there now appears to be a greater appreciation for the importance of our industry in delivering government’s wider economic and environmental ambitions.

“Recognising the value of the company car market in supporting the transition to zero emission technology is also a positive endorsement for our sector, showing refreshing alignment between government’s environmental and fiscal policies.”

“The Treasury is giving back some of the unfair Company Car Tax windfall it was set to receive as a result of WLTP and providing some essential extra visibility on future tax costs for those looking to order their next vehicle. This is a good day for company car drivers and our members.”

Today’s changes do not affect the Lease Rental Restriction, Capital Allowances or any other CO2 related taxes and incentives but will include fuel benefit charge.

The Government has missed an opportunity to make any WLTP-related adjustments to VED bands, although the BVRLA does acknowledge that there will be a call for evidence to look at the benefits of introducing more granular VED CO2 bands in the future.

Ashley Barnett, Head of Consultancy at Lex Autolease

Ashley Barnett, head of fleet consultancy at Lex Autolease, said: “The lack of clarity on the long-term tax regime for company cars has severely hampered uptake, clearly reflected in the most recent car registration figures from the SMMT and the reduction in the number of people paying company car taxation.

“Today’s announcement gives a degree of much-needed certainty to company car drivers and fleet managers. Coupled with the EV infrastructure announcement, it is a welcome sign of the Government’s commitment to stimulating company car uptake and getting newer, cleaner vehicles on the roads, a vital part of its Road to Zero strategy.

“It is really good to see that Benefit in Kind (BIK) will be 0% on EVs from April 2021 with this increasing by 1% to reach 2% in 2022-23 regardless of registration date.

“The freeze on BIK for vehicles under NEDCc at 2020-21 levels for two years is also welcome news for the fleet industry. This, coupled with RDE2-compliant diesel vehicles being exempt from the 4% diesel supplement, gives clear foresight for company car fleet decision makers.”

Matthew Walters, head of consultancy LeasePlan UK

Matthew Walters, head of consultancy and customer data services at LeasePlan UK commented: “We welcome the Government’s response to the review of the Worldwide harmonised Light vehicles Test Procedure (WLTP) and vehicle taxes, demonstrating ministers’ commitment to lower taxes for low emission vehicles.

“This is a milestone moment for the industry, as it is the first time company cars will pay no tax at all, following the announcement that zero emission vehicles, along with hybrids that have an all electric range of 130 miles, will have their taxes scrapped.

“We also welcome the clarity that this announcement has brought to the tax years of 2021/22 and 2022/33, as well as the notable reduced rate at which the increase will occur, by 1% per annum.

“Whilst the government is taking action, we are expecting higher CO2 figures on traditional fuels as we move to WLTP – it’s therefore essential that businesses work with their fleet providers to understand not just the costs involved, but the future fleet make-up and strategy  – which will undoubtedly mean exploring the potential for low emission vehicles.”

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