Budget 2018 was a "waste of a golden opportunity", says ACFO

The Budget was a “waste of a golden opportunity” to provide clarity and stability to fleet decision-makers on future company car benefit-in-kind tax rates, says ACFO.

Currently, only the tax rates until April 2021 have been published, which has caused uncertainty among fleet managers and drivers, as well as hindering forward planning.

The Chancellor also did not announce any changes to the bands, despite the new WLTP testing procedure raising the CO2 emissions figures of cars by up to as much as 20%.

However, both the BVRLA and leasing company Zenith welcomed Chancellor Philip Hammond’s announcement that an urgent review into the impact of WLTP would be carried out by spring 2019.

John Pryor, chariman of ACFO, said: “Budget 2018 has been a waste of a golden opportunity for the Chancellor to provide both clarity and long-term stability to enable fleet decision-makers to shape company car policies.

“The fleet industry must now wait until spring 2019 to know the future shape of company car benefit-in-kind tax and, in the meantime, uncertainty continues to rule.”

He added: “ACFO is hugely disappointed that the Budget did not contain any announcement on the company car benefit-in-kind tax regime beyond 2020/21.

“Introduction of the Worldwide harmonised Light vehicles Test Procedure (WLTP) for homologating vehicle emission and MPG data, the basis for the new regime, post 2020, has been in the pipeline for some time and the fleet industry had been led to believe that WLTP-based rates for 2021/22 and beyond would be announced in the 2018 Budget.

“Furthermore, the Chancellor did not even announce rates beyond 2020/21 for company cars tested under the old New European Driving Cycle (NEDC) and not under WLTP.”

Historically, BIK tax bands had been announced for up to four years in advance and the Chancellor’s failure to announce these in yesterday’s Budget will further drive employees to opt for a cash alternative instead of a company car, said Pryor.

He added: “As a whole ACFO questions what has happened to the government’s ‘green’ agenda. Recently the government cut the Plug-In Car Grant and in the Budget it has failed to answer our call for a U-turn on the decision to increase to 16% benefit-in-kind tax on cars with emissions of 50g/km or below in 2019/20 and bring forward the already announced reduced rates, including the 2% threshold for 100% electric models and those with an electric mileage range of up to 130 miles, to April next year from 2020/21.

“Those twin decisions will, ACFO believe, only serve to dampen fleets’ enthusiasm for ultra-low and zero emission cars, at least in the short term, at a time when the government says it wants to drive out petrol and diesel engined vehicles from the UK car parc.”

The BVRLA was dismayed that the Budget included no reference to an early introduction for the 2% company car tax rate for electric vehicles.

Gerry Keaney, chief executive of the BVRLA, said: “The Chancellor chose to ignore the overwhelming voice of fleets, motoring groups, business organisations, environmental groups and MPs – all of whom were united in calling for this simple tax measure to support the electric vehicle market.

“The Government has missed a golden opportunity to incentivise the most important market for electric cars and is in danger of undermining its own Road to Zero strategy. “

The Budget’s failure to address the WLTP tax issue was also criticised by David Brennan, CEO of Nexus Vehicle Rental. He said: “It was disappointing that the Chancellor failed to provide greater clarity on WLTP.

“While in the long-run it will obviously be a good thing to have more accurate CO2 readings, what this has done in the short-term is create barriers to the take-up of newer vehicles as fleets are unsure as to which tax bands they will fall into, and this uncertainty is now set to continue.”

Keaney urged the Government to publish a new set of tax bands as soon as possible.

He said: “It is great to hear that the Treasury is making plans to remedy any potential tax distortion caused by the transition to the new WLTP emissions standard in April 2020.

“It is vital that fleets and company car drivers are able to plan for the future, confident that they are working with more accurate emissions information and a fairer tax regime that rewards those who choose cleaner vehicles.

“These revised tax bandings can’t come too soon.”

Claire Evans, head of fleet consultancy at Zenith added: “For the fleet industry, although there is continued short-term uncertainty, it is to be welcomed that there is recognition by Government of the impact that WLTP is having on company car costs.

“We look forward to the promised review in Spring 2019 and expect it will deliver the correct level of adjustments to current rates of VED and company car tax, and clarity on rates beyond 2021.”