Members can read the latest updates and guidance following the Chancellor's 2020 Budget. Chancellor Rishi Sunak delivered his first Budget on Wednesday 11 March setting out the UK's economic response to achieve stability and security today and prosperity tomorrow.
The BVRLA welcomed the range of electric vehicle grants and tax incentives announced in the Chancellor's 2020 Budget.
Read the press release issued on 11 March 2020: Budget boost for zero emission fleets and drivers.
Budget Summary
1. Continue Plug-in Grants to 2022-23
1.1 The BVRLA requested clarity from Government on the future of the Plug-in Grants. These give vital support to the uptake of zero-emission vehicles, in the retail, fleet and rental sectors.
£403 million for the Plug-in Car Grant and £129.5 million to extend the Plug-in Grants of
vans, taxis and motorcycles.
1.2 The grant levels for the Plug-in Car Grant have changed from 23:59 11 March 2020:
- Plug-in Car Grant rate will reduce from £3,500 to £3000.
- Premium cars, costing £50,000 or more, will no longer be eligible to receive the Plug-in Car Grant.
BVRLA view: The Government has listened to the BVRLA’s concerns and given two years of foresight and support to the industry with this crucial incentive. However, it is unfortunate the level has been reduced so soon.
2. Freeze Company Car Tax (CCT) rates at 2022-23 levels until 2024-25
2.1 Government has adopted the CCT rates that they set out in July 2019, ending speculation that they would not be implemented in time for 6 April.
As set out in July 2019, the government will reduce most CCT rates by 2% in 2020-21 for cars first registered from 6 April 2020. Rates will return to planned levels over the following two years, increasing by 1% in 2021-22 and 1% in 2022-23. Rates will then be frozen until 2024-25.
2.2. In our engagements, the BVRLA argued strongly that the lack of CCT rates was holding back BEV adoption. Those not on three-year lease cycles or not up for renewal this year would be discouraged from BEV adoption.
2.3. Additionality the full impact of WLTP will have been transferred to the sector by 2022-2023 with the 1% annual increases.
BVRLA view: BVRLA welcomes Government giving two more years of clarity on CCT, giving a full five years of certainty. It is significant that these years also give confidence to users that zero-emission vehicles will continue to face low levels of BiK and ICE vehicles hit by WLTP face no further penalty.
3. Remove VED surcharge for BEVs
3.1. The removal of the VED surcharge for BEVs will reduce the tax burden on vehicles and remove confusion from the used market. This position is in line with what the BVRLA requested in its submissions to HMT.
3.2. The removal of the surcharge form BEV will be in place until 1 April 2025.
The removal of the VED surcharge for BEVs will reduce the tax burden placed on BEVs by £120 million over the next five years.
BVRLA view: We applaud the removal of the VED surcharge from BEVs. A significant portion of cars with the best range and safety features have a list price over £40,000 and this is now one less barrier to the transition to zero-emission road transport.
4. VED Call for Evidence
4.1. As requested by the BVRLA, Government has launched a VED call for evidence running until 3 June 2020. The BVRLA will be engaging extensively in the review process.
4.2. The call for evidence covers three areas: Reforming First Licence VED Rates, Greening VED after First Registration and Further Scope to Change VED.
First, the bands create a ‘cliff-edge’ system. Second, the differentials between band rates are uneven, meaning any given gram of carbon at the lower end of the tax bands is treated differently to a gram of carbon at the higher end of the bandings. The government believes that a granular system has the potential to address both issues, because it would reward every gram of carbon efficiency. The government is also interested in policy options to strengthen the link between VED liabilities and carbon emissions after year one.
4.3. BVRLA members are encouraged to engage with the Tax Working Group and input into our response to the review. Contact Senior Policy Advisor, Thomas McLennan (thomas@bvrla.co.uk) if you would like to be involved.
4.4. The call for evidence is accessible here: https://www.gov.uk/government/publications/vehicle-excise-duty-call-for-evidence
BVRLA view: We support the launch of the much anticipated VED Call for Evidence and will strongly represent our member’s views.
5. Rapid Charging Fund
5.1. The BVRLA asked that more is done to support fleets decarbonise, specifically the challenges of the postcode lottery and local network upgrades.
5.2. Government announced extensive measures to support the roll-out of a fast-charging network for electric vehicles. We specifically welcome the launch of the Rapid Charging Fund which will look to help businesses with the cost of connecting fast chargers.
Providing £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station. This will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid. To target spending from this fund effectively, the Office for Low Emission Vehicles will complete
a comprehensive electric vehicle charging infrastructure review.
BVRLA view: BVRLA will engage with the OLEV review to share member concerns and where they are constrained.
6. Capital Allowances: Tighter CO2 emission thresholds for business cars
6.1. Although the Government has helped company car drivers with a freeze in company car tax, it has hit businesses by reducing their ability to write down the cost of their new vehicles against their taxable income. Only zero-emission vehicles will qualify for 100% first year allowance, allowing businesses to write-off the full cost in year one. The threshold for cars wanting to obtain the main rate (18%) has been reduced to 50g/km CO2, with all cars emitting more than this now being eligible for the special rate (6%). The new 50g/km threshold will also apply for determining the 15% Lease Rental Restriction for the costs of hiring business cars for more than 45 consecutive days.
The measure extends the period for which the 100% first year (capital) allowances (FYAs) are available for this expenditure from April 2021 to April 2025. In conjunction with this, the measure also reduces the CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars. This will also reduce the threshold for the lease rental restriction. These changes will also come into effect from April 2021.
View: This measure will cost fleets an extra £185m over the next five years.
7. Local Air Quality Measures
7.1. In response to continued pressure to improve air quality, Government has increased its support package for local authorities.
The Budget therefore allocates an additional £304 million to enable local authorities to take immediate steps to reduce nitrogen dioxide emissions.
View: Local authorities need help in tackling air quality and this additional funding should be accompanied by guidance and support from central Government to ensure consistency and minimise local business impacts. The BVRLA will continue to engage to represent member views in this area.
8. Van Benefit Charge
8.1. In response to the feedback that the Van Benefit Charge was out of step with company car Benefit in Kind rates, HMT has brought in a nil rate for the Van Benefit Charge from April 2021.
From April 2021, the government will apply a nil rate of tax to zero-emission vans within van benefit charge.
8.2. There is no time period attached to the nil rating.
View: BVRLA welcomes bringing the Van Benefit Charge in line with broader policy incentivising zero-emission vehicle uptake.
9. Motorhome VED Treatment
9.1. In response to extensive lobbying, HMT has adjusted VED rates on motorhomes to bring them into line with vans.
From 12 March 2020, the government will reduce annual VED liabilities for most new motorhomes to a flat rate of £265, which will rise to £270 for 2020‑21.
View: The treatment of motorhome VED will remove a weight hanging over the motorhome sector and see motorhome rental companies more able to afford to renew their stock.
10. Additional Areas of the Budget
10.1. £12 billion plan to respond to the impact of Covid-19.
10.2. VED rates have been raised in line with RPI.
10.3. Vans will still face a CO2 linked VED structure from April 2021. However, HMT has opted not to publish the CO2 bandings until they have more data from WLTP compliant vans.
10.4. Alongside the Budget, the government has published its remit to the Low Pay Commission (LPC) for 2020. The remit asks the LPC to make recommendations with the view of reaching a National Living Wage (NLW) of two-thirds of median earnings by 2024, over £10.50 an hour.
10.5. Fuel duty is frozen for the tenth year.
10.6. £29.5 billion has been allocated for roads and pothole repairs.
10.7. The government is investing £4.2 billion in the transport networks of eight city regions across England from 2022-23. Funding will be delivered through five-year, consolidated transport settlements agreed with central government and based on plans put forward by Mayors.
10.8. The Corporate Tax rate will not receive the proposed cut and will remain at 19%.
10.9. Consultation on the Comprehensive Spending Review (CSR) was launched, it will close in July.
