COMPANY car tax will be based on a sliding scale of charges related to carbon dioxide emissions of vehicles, Fleet NewsNet can reveal. Inland Revenue policy experts want to see the new benefit-in-kind tax regime, scheduled for April 2002, accurately reflect the emissions performance of every company car on UK roads.

This will reward the lowest emission vehicles such as the SEAT Arosa 1.7 by taxing them at 15% of their list price, and penalise so-called gas-guzzlers like the Range Rover 4.0 V8 by taxing them at 35% of their list price. These parameters may move to ensure the system remains revenue neutral but, in between, company cars' precise CO2 emissions will determine what percentage of their list price is used to calculate their taxable benefit. The fleet industry has until May 31 to comment on the future shape of company car tax, after the Inland Revenue this week outlined its blueprint for the new format which it will later submit to Treasury ministers for approval.

This blueprint, which excludes all reference to mileage, includes no penalty supplement for diesel-powered company cars. Diesel vehicles produce significantly lower carbon dioxide emissions than petrol equivalents, and look set to benefit under the new scheme. Originally this led the Inland Revenue to invite comments on whether a company car's emissions 'should also take into account local pollutants (such as particulates and nitrogen oxides) as well as carbon dioxide emissions'.

But Sara Woollard, the policy adviser in the Inland Revenue's personal tax division who is co-ordinating the reform of company car tax, said the Government had other tools at its disposal to tax different fuels. She emphasised that the principal goal of the tax changes was to incentivise company cars which produced the lowest levels of the greenhouse gas CO2.