The Treasury has hinted that the Government may introduce further incentives for ultra-low emission vehicles after being criticised for its plans for company car tax.

The chancellor announced in March’s Budget that, from 2015/16, zero and ultra-low emission cars, such as electric vehicles, will no longer be exempt from company car tax or from the first-year allowance for leasing firms.

However, in last week’s Autumn Statement, George Osborne signalled his intent to look again at how the Government can continue to offer incentives for the adoption of green vehicles.

It could prove to be yet another U-turn for a chancellor who has already had to abandon some of the measures he announced in the Budget. He dropped plans to impose the full rate of VAT on hot food – dubbed the ‘pasty tax’ – and static caravans after protests from bakers and caravan makers.

He then also ditched plans to limit tax relief on charitable giving after protests from charities.

On page 71 of the 96-page ‘green book’, which gives details on the Autumn Statement, the Treasury outlined its plans to review company car tax.

It said: “The Government will consider the case for providing time-limited incentives through company car tax to encourage the purchase and development of ultra-low emission vehicles, while ensuring that all company cars are subject to a fair level of taxation.”

ACFO chairman Julie Jenner welcomed the move.

“The chancellor has promised to seek views ahead of Budget 2013 and we will ensure ACFO take part in those discussions to represent the views of our members,” she said. “The increases in company car benefit-in-kind tax announced in the last Budget penalise employers and employees who have been doing exactly what the Government requested of them – choosing low emission cars.

“Employers and company car drivers who take on board the Government’s signals by choosing green vehicles need to be rewarded and not punished.”

From 2015/16, all company cars with emissions below 95g/km will be taxed at 13%. That means that any company car drivers choosing an electric vehicle will see their BIK tax bill increase from 0%.

Similarly, drivers of a company car with emissions of 1-75g/km will see their tax bill rise from 5% (8% for diesel cars) in 2012/13 to 13% in 2015/16 (16% for diesel cars) and those at the wheel of a car with emissions of 76-94g/km will see their tax bill rise from 10% (13% for diesel cars) in 2012/13 to 13% (16% for diesel cars) in 2015/16.

The Treasury said its review of company car tax for ultra-low emission vehicles would focus on vehicles emitting below 75g/km.

Jenner continued: “The Government must amend previously con-firmed company car tax rates up to 2016/17 to encourage their uptake.

“If that means the chancellor performing a U-turn on BIK tax thresholds already announced in relation to electric cars and other vehicles with emissions below a certain threshold, then that should happen at the earliest possible opportunity.”

Meanwhile, the BVRLA has reiterated its call for the leasing industry to retain its access to the 100% first-year allowances available on ultra-low emission vehicles.

Osborne elected in March’s Budget to stop leasing companies from being able to write-down 100% of the cost of buying the car against profits in the first year.

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