Company Car Tax – Emission Impossible as Electric Takes Charge

Oct 23, 2019 | Tax services, TC news

As Edinburgh Chamber of Commerce Partners we contribute towards their fabulous Business Comment magazine. In the October/November issue, our Tax Manager Scott Hallesy explains company car tax and the UK Governments push to lower transport emissions.

According to the UK Government’s “Road to Zero” strategy published in July 2018, it is their ambition that 40% of vans are to be ultra-low emission by 2030, and almost every car and van in the UK is to be zero emission by 2050, with a “long-term” vision to make all HGVs zero emission.

It seems likely that one of the tools which the Government will use to clear the path for these changes is to increase the rates of tax applying to conventionally fuelled company cars and vans. The latest HMRC statistics show that although the number of company cars has reduced by 10% compared to 2008/09, the tax take has increased by 28%.

Part of the reason for this rise is down to the fact that company car tax rates are on the increase. For example, a ‘typical’ five-door hatchback diesel car will have a benefit-inkind increase of 24% (petrol 29%) between 2017/18 and 2020/21.

On top of this, the switch from April 2020 of the test basis for determining CO2 emissions from the New European Driving Cycle (NEDC) test to the World Harmonised Light Vehicle Test Procedure (WLTP) is likely to further increase the amount of tax payable. Initial evidence provided by manufacturers suggests that over 50% of cars will see an apparent increase in CO2 emissions because of the switch from NEDC to WLTP of between 10% and 20%. For motorists choosing a new car from April 2020, this could result in an increased tax liability, compared to an identical model chosen before this date.

Despite the short term increase in the benefit-in-kind rate for company car tax for sub-75g/km ultra-low emissions vehicles (ULEVs) and zero emissions cars, from 2020 all electric vehicles will drop to a 2% rate and “Alternatively fuelled vehicles” (AFVs) are likely to be subject to a much more palatable tax regime in the future.

It is clear that electric cars need charging infrastructure and the Scottish Government has established the ChargePlace Scotland scheme through grant funding of Local Authorities and other organisations to install publicly available charge points across Scotland.

Our specialist tax team can advise on all aspects of company car taxation and your inital consultation with us is free. Call Scott Hallesy on 01383 628800 to arrange a meeting.

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