Committee on Climate Change wants company car tax shift

The Committee on Climate Change is calling on the Government to bring forward the 2% tax rate for pure electric company cars.

In response to the Government’s Road to Zero strategy, Lord Deben, chairman of the Committee on Climate Change, has written to ministers making a series of recommendations.

The letter recommends that the Government takes action to tackle emissions reductions from transport, including:

• Set out a vision for future travel demand.
• Accelerate the uptake of the cleanest vehicles.
• Reduce risks and costs to vehicle manufacturers by providing clarity on new car and van targets beyond 2020 and tighten testing procedures.
• Address supply issues and long waiting times for electric vehicles.
• Support the efficient rollout of affordable EV charging infrastructure.
• Tackle emissions from trucks.

On company car tax, Lord Deben says that it is “failing to incentivise ULEV sales in the short term”.

He continued: “Employees in receipt of company cars that are also used in a private capacity are in receipt of a benefit in kind, and are taxed on this benefit accordingly.

“A finely graduated, best-in-class system is in place for 2020/21 to make sure this tax takes account of emissions, but until then ULEV tax rates will be increasing from 2018/19 to 2019/20 and there is no tax incentivising the choice of BEVs over PHEVs, suggesting that some customers may delay getting a BEV or long-range PHEV until 2020/21 given the significant drop in tax rate that will occur in that year.

“The company car tax system should be addressed to avoid BEV uptake stalling until the lower rates come in.”

It is one of the measures, outlined in its Fleet Budget Manifesto, which Fleet News is calling for the Government to address in the forthcoming Budget.

A survey conducted for the British Vehicle Rental and Leasing Association (BVRLA) showed that 42% of senior decision makers in small and medium size businesses who use vehicles would be likely to increase the number of electric vehicles they use if national and local government offered greater support, including tax incentives, free parking and more charging infrastructure.

Commenting on the letter from Lord Deben, BVRLA chief executive Gerry Keaney said: “The BVRLA is pleased to see its call to bring forward the 2% company car tax for ULEVs has been championed by the Committee on Climate Change in its letter to Secretaries of State Greg Clark and Chris Grayling.

"As our YouGov polling from July this year showed 4 in 10 SME senior decision-makers would be responsive to electric vehicle incentives such as a supportive tax regime, now is the perfect opportunity for the Government to align its tax policy with its air quality ambitions and use the Budget later this month to support greener vehicle choices through the uptake of company cars.

“If leveraged appropriately the company car tax scheme has enormous potential to support the Government’s Road to Zero aims. Unfortunately the present plans to increase the tax on ULEVs before dropping to 2% will undoubtedly put off many fleet managers and drivers from taking up such vehicles.

“By expediting the shift to a 2% tax rate the Government could provide a much-needed stimulus to the electric vehicle market, which is currently growing at less than 4% per year.”

To read Lord Debden’s letter, click here.