By now, the motorists in this country have become used to being slapped around the head by successive governments as for years they have been used as a cash cow for even the most flimsy of reasons.
There were few surprises in Mr. Darling’s big red box, as all of us knew that we were going to be encouraged to drive a less polluting vehicle, by being taxed out of all existence if we did otherwise. It was just how was he going to structure it and how big would those “punishment” taxes be for daring to drive something that didn’t fit in with the “squeaky wheel” green agenda, or should I say “The King Report”.
Everything from now on is going to be based on what pollution a vehicle chucks out, in other words, what its Co2 g/km rating is. The lower the Co2, the lower you will pay, the higher the Co2, the more its going to cost you.
The Chancellor also announced his plans to reform the way capital allowances are calculated by basing this on Co2 also, to encourage fleets to opt for cleaner vehicles. Don’t ignore this, for as an employer, its going to be you that’s going to pick up the tab as the cost of running your vehicles will go up if you stick with vehicles that produce a high Co2. Conversely, you’re going to be able to save, if you go the other way.
Whilst everyone is aware of global warming and it has to be said that not everyone agrees, until it’s proven otherwise however, everyone who drives anything is going to find that pleasure or in most cases, that necessity is going to cost them more with pollution being the latest name written on the big stick they hit us with.
So what’s it all mean to us this time around?
One of the major headlines from Mr. D’s budget is the planned changes to Vehicle Excise Duty will see high emitting cars pay higher taxes in the first year after they are registered, with the least polluting cars paying no tax at all during this period. This is the headline grabber and effectively by introducing the honeymoon tax break for low emission cars it’s hoped it will get the attention of drivers, pushing them to move away from cars above the magic 130g mark. The idea is to make people think more carefully about the vehicle they choose.
Fact is, the wealthy, or successful businesses will still choose to run prestigious desirable vehicles “that usually are fairly high polluters” not just because they can afford to, but because they believe they deserve to and they want to. How often do you envisage a companies Chief Executive Officer choosing a Citroen C3 as his company mount.
Strangely though, I think this budget might actually be good for the car industry and just see an increase in the number of company cars as employees at the lower end who had previously opted out of the company car scheme realise just what good value a sub 130g/km company car will now offer.
Obviously, the penalties at the higher end are designed to drive many executives away from their gas guzzlers, but frankly, yes, whilst it will have some impact, if you think the number of big motors and 4×4’s you see on the road is going to drop dramatically, forget it, it won’t. If an executive can afford it and is happy to pay for the privilege, well you know the rest…….
The smart way to look at this is that it isn’t going away and if you want to have a company car, well plan ahead and choose you next car carefully. Look for vehicles ideally with a sub 130g/km rating, but certainly stay below the 160g/km rating, as it seems it’s above this where you will be considered to be an earthly incarnation of the devil and be punished.
Mr. Darling also said that the limit on new car emissions should be a much tougher at 100g/km – with this limit planned to come into force in 2020. Stunningly, Mr. Darling said that switching to the cleanest cars on offer can save the motorist substantially on fuel cost. Well there’s a blow, as I am sure none of us had realised that a diesel Fiesta did more to the gallon than an Aston Martin. Unfortunately, it seems that once these draconian measures are introduced, its goodbye to your dream Porsche or Ferrari.
The only bright spot of this budget as far as motorists were concerned was the decision to delay the 2p increase in fuel duty. That said, it’s only a delay and we are going to get it just a little later in the year.
The cost of fuel has risen by 20% in the past 12 months and many now believe that the Chancellor should look again at the idea of a fuel duty stabiliser to protect British motorists from the shocks of the global oil market.” But that’s logical and sensible and so he hasn’t done it, so don’t expect a change of mind on that at any time soon.
Regarding all that tax we pay as motorists and where it all goes, you will be pleased to know that Mr. Darling announced “no provision for additional spending on the UK’s road network” yes that’s it “nothing, nil, zilch, zero” so that’s good value for all the money we pay.
So how’s time going to judge this budget? Well no one wants to deliberately destroy the planet, but there is so much going on which is doing just that, yet being ignored. The car industry has in the last 10 years made greater strides forward than any other industry. A Fiesta now days produces around one 3rd of the pollution an early Fiesta did and that’s a stunning improvement and I wonder if you can think of any industry that has made a comparable reduction.
It’s all about PC, or political correctness. Plastic carrier bags are bad, so lets get rid of them despite all the inconvenience. Yet as our darling little offspring need soft bottoms, let’s stick with the totally unnecessary use of disposable nappies, whilst we know that every one that ever covered a bottom is still alive and well and living and polluting a landfill site near you. But dare to drive a car, well that’s different!
Cars are an easy target and I think time will look back at the early 2000’s as the beginning of the death of our personal transport. Driving is nice, remember going out for a Sunday afternoon drive? Remember that feeling of independence? Remember pushing a car around a country road? Or just being able to “at a whim” throw a few things in the boot and drive off to visit some long lost relative across the other side of the country. That’s what’s on the line here; it’s more than pollution and whilst I understand that nothing lasts forever, that applies to the planet as well and if you can’t use something, well there is little point in having it is there? Chances are we are all going to blow ourselves up some day, or a great big rock will hurtle out of space and that will be that. Well it’s on that day that we are going to look back and ask what the heck were we thinking of in the early 2000’s? What a waste of time.
Meanwhile, our advice to Companies is that if you make the right decisions now, the future will be bright for you and you can and will reduce your costs. You should take a look at your company car policy right now. See who’s driving what and how everything compares in terms of Co2. Bring in a global policy, perhaps with the Co2 as the first major criteria. This gives you a superb chance to have a real and justified sort out without upsetting your staff or them taking it personally. We all have drivers who are in cars they shouldn’t be in, but now, we have the opportunity to level the playing field and move forward with a fair and equitable policy that keeps your staff happy and saves you fortunes both in terms of capital allowances, fuel costs and probably vehicle costs also. Don’t forget that changes in Co2 are progressively going to affect the driver also as its going to personally cost him more, so getting together can only be a win win situation. If you don’t urgently look at the higher emitting cars on your fleet, fact is, you will be seeing significant increases in cost as these changes take place and so will your driver.
In Summary:-
- Company car tax rates will be increased on all but the cleanest cars emitting less than 135g CO2/km or less in 2010-11; In addition to reforming Vehicle Excise Duty, in his budget Chancellor Alistair Darling promised that the Government will further promote the take up of cleaner cars through reforms to the taxation of business travel.
- Effective 1st April 2009 the capital allowance treatment of all cars will be reformed by replacing the existing capital allowance treatment for business cars with an emissions based approach
- Expenditure on cars with CO2 emissions above 160g/km will attract 10 per cent Writing Down Allowance (WDA) and expenditure on cars with CO2 emissions of 160g/km or below will attract 20 per cent WDA. Subject to state aid approval, cars leased to those in receipt of certain disability allowances will be placed in the 20 per cent main pool, regardless of their CO2 performance.
- The 100 per cent first year allowances (FYA) for the cleanest cars will be extended from 31 March 2008 to 31 March 2013 and the qualifying CO2 emissions threshold will be reduced to 110g/km;
- The 100 per cent FYA for gas re-fuelling infrastructure investment will also be extended from 31 March 2008 to 31 March 2013, and its scope expanded to include biogas infrastructure;
- The incentive to drive fewer miles will be strengthened by increasing the fuel benefit charge at least in line with the Retail Prices Index from April 2009; and
tax-free mileage allowances (AMAPs) rates and thresholds will be maintained at current levels. - The rules which disallow a proportion of car lease rental payments will be reformed in line with the new capital allowances rules. The new disallowance will be 15 per cent of the relevant payments, applied to cars dealt with in the 10 per cent special rate pool.
There is time to plan ahead and because these changes are so radical, there needed to be time, but that does not mean you shouldn’t do anything yet. For every vehicle you acquire from today onwards, check its Co2 and ask if there is a lower alternative. If you need any advice or help deciding on the vehicles you should be operating, or help in arriving at a company car policy, please contact us.
