The Government has set out a number of environmental measures in today’s Budget which will impact on company car fleets.
There has been an increased focus on the carbon footprint of the company car fleet. Vehicle excise duty rates have disproportionately gone up for very high emission cars (£300 now and £400 from April 2008). Petrol has also been aligned upwards to mirror the diesel rates.
Alison Chapman, tax partner at Deloitte said:
"These changes may not influence the sale of new high emission cars to a retail customer. However the effect on companies is likely to be very different. A drop in anticipated re-sale value (plus the increased annual cost) can have a big effect on the whole life cost to the company which is then less likely to want to add these cars to its fleet."
In addition, it is expected that there will be a change to the basis of taxation on the capital cost of company cars. This is expected to move to taxation on an emission basis from April 2008.
Business mileage reimbursement rates are also likely to change with effect from April 2008 to encourage drivers back into company cars. This is an attempt to discourage people from driving their own cars on business and travelling unnecessary business miles.
Chapman added: "This will further discourage companies from having high emission cars on their fleet. As a result companies will have to reconsider some of the cars that they allow their employees to drive, as the increased cost of higher CO2 emission cars hits home, and the many "user-chooser" fleets in this country will start being more selective. Smart companies will start to bring tax into their calculations of the whole life cost of the cars on their fleets."
For further comment from Alison Chapman please call our Budget press hotline: 020 7007 3333.
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