Fleet managers, their drivers and finance directors concerned about the rising cost of running their company vehicles need to listen out for the following when the Chancellor delivers his Pre-Budget Report this afternoon at 12:30.

Fuel duty

The cost of fuel has been rising throughout the year, with much of this additional cost down to tax increases. Since the last PBR,  fuel duty has risen by almost 6p per litre. Duty is planned to increase again by a further 1ppl next April. However, some fear that may be brought forward or increased in the PBR.

VAT

Value added tax (VAT), which can be reclaimed by some businesses, will rise back to 17.5% at the end of the month. This will add around £500 to the cost of an average new fleet car. It will also increase the cost of fuel...again. For companies that do not claim back VAT, this rise will add a significant cost burden in the New Year and even for those that can claim the tax back, it will add a major cash-flow issue. There are also fears that the chancellor may use the PBR to increase VAT to a higher level than 17.5%.

Benefit-in-Kind and National Insurance

There are predictions that the chancellor is considering major tax cuts for electric fleet cars. It is reported that he plans to cut tax on company-owned electric cars to zero, according to Reuters. If he does, businesses will benefit from reduced National Insurance contributions, while employees who drive electric company cars will see their Benefit-in-Kind tax bill tumble to 0% within three years. The lowest BiK rate, which currently applies to electric vehicles, is 9%.

Capital Allowances

 It is possible that the chancellor will look again at capital allowances, which were changed in the last Budget to incentivise fleets to adopt lower emitting vehicles. From April this year, a company buying a new car with CO2 emissions of less than 110g/km benefited from 100% first year allowance. A fleet acquiring new cars cars with emissions between 110g/km and 160g/km get an allowance of 20% but fleets acquiring cars with emissions over 160g/km get just 10%. The chancellor may use the PBR to indicate whether he plans to amend these levels again.

Road tax

Changes to the road tax system and the adoption of the 13 tax bands - which determine how much road tax is payable for a car based on its CO2 emissions - are set to come into force in April 2010. These changes also include a one-off 'showroom tax' which will penalise the purchase of high-emitting cars. It is possible that the chancellor may add further changes to the road tax system to boost Government coffers.