Motoring Taxation

Below is a summary of the BVRLA's stance on the key elements of motoring taxation affecting members:

1. Company Car Tax

The current company car tax regime has delivered against and even exceeded expectations in CO2 reduction. However, the BVRLA believes there is room for improvement in keeping with the department’s ‘simpler and more efficient’ tax agenda.

a) Certainty and stability - The certainty and stability delivered through the provision of a three year rolling cycle on the company car tax bandings has been immensely beneficial and fully supported by both individuals and businesses alike. With more company cars being leased on four-year terms, the BVRLA will also be urging the government to publish rolling company car tax bands for at least five years so that fleets can make informed choices.

b) Technology Neutral - BVRLA will be warning the Government not to attempt to back specific vehicle technologies and ensure that steps are taken to ensure the tax regime keeps pace with technological advances.

Electric vehicles – the tax treatment on company-provided EVs and electricity is very complex as summarised in Table 1.

c) Diesel Penalty - BVRLA can see no justification for the current 3% diesel supplement on benefit-in-kind tax for company cars and fuel. Removing this historically out-of-date, air quality pollution-related penalty would stimulate adoption of these vehicles and help to lower company car emissions even further, especially with the emergence of diesel-hybrids. This tax penalty is deterring and penalising company car users selecting vehicles with the lowest CO2 rating in class. It is also eroding the Government’s wider environment goals, when in fact the air quality pollution emitted by diesel cars is reduced to that of petrol equivalents. BVRLA accepts that there may be the need to make compensatory adjustments to the benefit-in-kind base lines across petrol powered vehicles to neutralise the tax take impact.

2. Fuel Duty

With crippling costs facing businesses, the BVRLA welcomed the announcement by the Chancellor to abandon the 3p rise in fuel duty planned for January 2012 and will be commenting on the planned design of the fuel price stabiliser to help support growth and stability within the economy.

3. Approved Mileage Allowance Payments (AMAP)

We will continue to urge the Government to consider aligning the rates to a level which offers actual incremental based compensatory cost per mile rates for running privately owned vehicles. We are aware that both the public and private sectors are becoming increasingly concerned with the levels of payments they are making to their employees using the AMAP rates.

4. Vehicle Excise Duty - Reducing waste

To help cut waste and deliver efficiency savings to both the Government and vehicle owners, BVRLA will be ensuring there is momentum to remove the need to display the tax disc and that the ability to purchase a multi-year VED is catered for. Adopting these recommendations will also have the added benefit of reducing regulatory and compliance costs on UK businesses.

a) Abolishing the need to display tax disc - BVRLA estimates this would bring an annual cost saving of around £91 million without any deterioration in the number of legally taxed vehicles. Not having to display the tax disc would also reduce the burden on fleet owners who would no longer have to distribute tax discs to drivers or retrieve them when they were seeking to claim a refund.

b) Multi-Year VED - Being able to pay VED up-front for the full duration of the lease term (typically three years) would substantially reduce administrative costs as BVRLA members currently have to purchase the VED annually and ensure the tax disc is sent to the driver. This step would improve cash-flow to the Exchequer because more tax would be paid in advance and it would also bring annual administrative savings worth between £2 and £5 million for our members. We also estimate an immediate £4.5 million annual saving for the DVLA in printing and distribution costs plus further millions of pounds savings for the DVLA, over the longer term, as it will no longer have to process renewals annually.

5. CO2 based Capital Allowances

In April 2012 the CO2 based rules for claiming capital allowances on cars will have been in place for three years.

Special Pool - Companies purchasing cars with emissions of 161g/km and above must allocate the expenditure to a ‘special rate’ plant and machinery pool – currently firms will be able to write down allowance of 10% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis. This, subject to legislation, will change to 8% from April 2012.

Lease Rental Restriction (LRR) - Cars with CO2 emissions of 161g/km or more face a 15% lease rental restriction, meaning that they can only deduct 85% of any rental payments against their taxable profits. If there is a chain of leases, this disallowance will apply only to rental payments made by one lessee in the chain.

With the UK new car fleet average CO2 figure dropping to 138.9g/km in 2011 down from 144.2g/km in full year 2010 the majority of leased vehicles will remain unaffected by the LRR. However, the BVRLA has argued that the LRR represented a double emission tax and was discriminatory towards leasing and it is inevitable that HM Treasury would look to lower the 160g/km threshold.

BVRLA will not be proactively lobbying on the unfairness of the LRR, and instead the Association will only challenge the status quo, if and when, the Government announce its decision to review the 160g/km threshold.

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