Fleet sector united in calls for tax reform

Claire Evans, Head of Fleet Consultancy at Zenith, explains why government needs to rethink its approach to vehicle tax

As the UK’s leading independent leasing, fleet management and vehicle outsourcing provider, Zenith, together with our fleet sector colleagues will be largely responsible for delivering the government’s Road to Zero strategy and de-carbonising the UK’s automotive sector.

Figures from the BVRLA show that the vehicle rental and leasing sector registers more than one in every seven vehicles on the UK’s roads, buying nearly 50% of new vehicles sold annually, including around a third of all new electric and plug-in hybrid. Leasing companies advise tens of thousands of customers on the most appropriate vehicles for their needs.

Our industry is also key to feeding the used car market with nearly-new affordable, low emission vehicle options for those who may find new options unaffordable or unobtainable. The leasing and rental sectors accounted for 18% of all used vehicle transactions in 2017, giving a clear indication that in the next few years, many electric cars and vans coming on to the used market will be former lease or rental vehicles.

It’s clear to me that Zenith and other BVRLA members have a lot to offer the government on the Road to Zero but the current tax and infrastructure environment is failing to keep pace with policymakers’ ambitions.

We are increasingly working with fleets on the transition to cleaner fuels, helping them set targets and put policy in place to make more plug-in and electric cars available to drivers. Key to this transition is the incentives and taxation policy. However, the recent removal of the grant for plug-in cars and the cut in the amount for pure electric vehicles was a poorly timed decision that has damaged consumer confidence. This also provides an example of how the government’s fiscal and environmental priorities are misaligned.

In my opinion, taxation could do a great deal to accelerate the uptake of Ultra-Low Emission Vehicles (ULEVs) and as we look to the future, what will happen to the current mix of emissions-based taxes? While there’s clarity on how the government plans to move to zero-emission transport through the Road to Zero strategy, there’s been no signal on how revenues from the traditional use of petrol and diesel will be replaced. As it tries to draw up its own plans, our fleet sector is concerned about the longer-term view on motoring taxation, or rather, the lack of it.

The future of mobility is driving behaviour change across the sector. One rapidly emerging trend is the growing shift from vehicle ‘ownership’ to ‘usership’. This reflects broader societal changes where a subscription-based culture, especially among millennials, is becoming the norm. There is less focus on the prestige of owning a car and much more concern about the monthly or per-journey cost. Therefore, should taxation continue to be based on ownership or should it be based on usership, effectively a tax on mobility?

Examples of how the transport and tax future might look are beginning to appear elsewhere in Europe. There is undoubtedly much that can be learned from Norway and other countries that are well ahead of the UK in adopting zero-emission vehicles. EVs were responsible for 31% of new Norwegian registrations in 2018. It’s been achieved on the back of massive incentives, including ones that appeal to all users rather than just the first buyer, including exemption from most taxes and tolls as well as free parking spaces and charging points.

As policymakers, manufacturers and users struggle to navigate the changing landscape, the leasing sector are acutely aware that 2030 is only a few fleet cycles away. If the sector is to play its part in the decarbonisation of transport, then clarity in tax strategy becomes vital. For many of the sector’s clients, the Road to Zero has massive implications in terms of capital outlay on vehicles, charging infrastructure and business models. And make no mistake, the decisions made by Zenith, its counterparts and their clients will impact on every aspect of the supply chain.

The recently published Road to Zero: time to shift gear on tax report, commissioned by the BVRLA, shares industry perspectives all calling for tax reform – and is a must read!

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Claire Evans

Head of Fleet Consultancy, Zenith

Claire has been a BVRLA guest blogger since March 2019.