CHANCELLOR of the Exchequer Kenneth Clarke has been told not to increase the 2.5% insurance premium tax in his November 26 Budget. The tax raised £635 million for the Government last year after being introduced in October 1994 and VELO insurance director Tina Neale said her main concern was that the Government may be tempted to increase the level of the tax over the next few years until it reached the same level as VAT - 17.5% - as has happened in some other countries.

VELO claims the 2.5% tax has resulted in additional costs to fleet operators and has increased the administrative burden placed on insurance companies which has ultimately resulted in premium increases. Neale said: 'Insurance premium tax has therefore become yet another form of tax on the use of company cars - to add to the pressures already produced by other penalties, such as benefit-in-kind tax. Instead the Government should be encouraging the use of company cars, as they represent a vital cog which helps to ensure that the world of business runs smoothly.'