The Chancellor of the Exchequer has delivered his summer Budget, the final before the Budget reverts to Autumn. The key announcements of interest to BVRLA members are as follows:
Vehicle Excise Duty
As previously announced at Budget 2016, VED rates for cars, vans and motorcycles registered before April 2017 will increase by Retail Prices Index (RPI) from 1 April 2017.
VED rates for hauliers and HGV Road User levy are both frozen for a further financial year (from 1 April 2017). A call for evidence will be launched over the summer on plans to update the current HGV Road User Levy, with a greater incentivisation of efficient routes and better air quality vehicles.
BVRLA Comment: The Chancellor chose not to defer the introduction of new Vehicle Excise Duty rates which come into force next month. As a result, the car hire industry will see its first year VED bill rise by almost 400% in 2017. Firms will also be unable to claim back £1.67million every year in legitimate refunds. Car rental companies operate the newest fleet on UK roads, and the average rental car is just eight months old. The sector purchases around 324,000 cars each year, but this number is now likely to fall as our members lengthen their operating cycles in an attempt to reduce the cost impact of the new VED regime. The BVRLA's fact sheet is available here.
Company Car Tax
Company Car Tax rates also remain unchanged. To read more on the current rates, please see the BVRLA fact sheet.
Benefits in Kind
The Government is considering how the tax system could be made fairer and more coherent, with a further consultation planned over summer 2017 to consider the taxation of benefits in kind and employee expenses. This will look at exemptions and the valuation methodology for the income tax and employer NICs treatment of benefits in kind, in order to better understand whether their use in the tax system can be made fairer and more consistent.
Fuel Duty will remain frozen for a further financial year, from 1 April 2017 throughout 2017-18. Fuel duty has not risen since March 2011.
BVRLA Comment: The association has welcomed the Chancellor’s decision to freeze fuel duty for the eighth year in succession, as well as the news that both the VED rates for hauliers and the HGV Road User Levy will remain frozen for another year. However, the BVRLA believes Mr Hammond’s first and last Spring Budget was the perfect opportunity to create a fairer, simpler tax system that incentivises the uptake of ultra-low emission vehicles. We are now left with company car tax and VED regimes that do little to support the Government’s green agenda or tackle the growing air quality crisis.
The Government will publish a new Air Quality outlook and plan in the next two weeks, which will be put out to consultation over the summer ahead of making any tax changes at the Autumn Budget 2017. In particular, the Treasury has indicated concerns about certain types of diesel vehicles in certain areas of the country, so a multi-pronged approach may be considered.
BVRLA Comment: Diesel vehicles remain a vital part of the fleet mix, as diesel engines are the most energy-efficient internal combustion engines. It is often the most appropriate powertrain for long distance journeys and non-urban freight transportation, and the latest Euro 6 diesel engines have made some major gains in reducing harmful NOX emissions. As one of the stakeholders engaged with HM Treasury, we look forward to working with policymakers to ensure they do not adversely impact the UK automotive sector.
As announced at Autumn Statement, Corporation Tax rate will be cut to 19% from April 2017, and again to 17% in 2020. There will also be a change in the way this is recorded, to an accruals-based approach, in line with the ONS’s updated methodology.
The Government will invest £90 million for the upkeep and upgrading of roads in the North, and £20 million for those in the Midlands, from the Strategic Roads Network fund.
There will also be a new £690 million competition for Local Authorities to tackle local congestion. Further details will be announced by Transport Secretary, Chris Grayling, in due course.
The Government will also provide additional investment of £270m funding toward new disruptive technologies including biotech, robotic systems and driverless vehicles.
The Government will carry out a consultation on the legislative changes required following the announcement of the International Accounting Board’s new leasing standard – IFRS16, which comes into effect on 1 January 2019 – over summer 2017. At present, the Government intends to maintain the current system of lease taxation by making legislative changes which enable the rules to continue to work as intended. Further information on the new standard is available here.
The full Budget document can be read online.