THE INLAND Revenue has dismissed fleet industry fears that list price falls of up to 20% will trigger company car tax increases as the Government seeks to plug a £200 million hole in its company car tax account in the wake of tumbling new car prices.

At the British International Motor Show in Birmingham, motor industry bosses were concerned that chancellor of the exchequer Gordon Brown could use his March 2001 Budget to increase the 35% threshold to 38% or even 40% to ensure his 'take' remains intact.

Latest Inland Revenue statistics show that in 1997/98 the Government raised £1.71 billion in company car tax and that sum is expected to rise to £1.76 billion when 1998/99 accounts are published and reach £2.01 billion for the last financial year.

Peugeot sales director David Brookman told FNN: 'If P11D revenues decrease because of reduced list prices the chancellor will seek to raise the 35% level to offset the losses.'

However, an Inland Revenue source dismissed the notion and told FNN losses as a result of falling list prices would amount to between £15 million and £200 million depending on the behaviour of company car drivers.

The source said: 'When drivers change their cars, if they opt for a similar vehicle with a cheaper list price, the tax take will fall. However, they may decide to keep their tax bills at the same level and opt for a larger or high-specced car.'

The issue is further complicated by the Government's decision to replace the existing list price/business mileage-based company car tax system with one based on list price/carbon dioxide emissions from April 2002.

The format of the new system was announced in this year's Budget and the banded structure is capped at 35% of a vehicle's list price.

Mary Braim, policy adviser on transport benefits at the Inland Revenue, said: 'No-one has raised this issue with us. There are no plans to raise the company car tax threshold and there has been no indication from ministers that it is under discussion.'

Association of Car Fleet Operators director Stewart Whyte said: '35% of list price is a realistic proxy for the value of the benefit of not having to run your own car. The Government is not seeking to maintain revenues but is seeking to maintain a fair level of taxation. The Government might seek to recover cash from somewhere but I don't think the reduction in list price will lead to an increase in the 35% tax rate.'