Budget 2014: Reactions from the business car industry
19 March 2014
Andrew Hogsden, Senior Manager, Strategic Fleet Consultancy at Lex Autolease, said: "Fuel costs remain a significant overhead for businesses that operate vehicle fleets. Although the pledge to freeze fuel duty was a step in the right direction, we would have liked to see the Chancellor go further and announce a cut in fuel duty.
"Reducing this burden would provide business with a much needed cashflow boost as they look to capitalise on the opportunities presented by the recovering economy"
"Given that ultra-low emission vehicles accounted for just 0.3% of total new car registrations last year, it's clear that more needs to be done to stimulate uptake. The Government's decision to increase the discount for these type of vehicles is a step in the right direction, although businesses will still need to assess the financial implications of this change before deciding whether to include electric and ultra-low emission vehicles in their fleet."
"The decision to press ahead with plans to raise BIK rates on electric vehicles to 5% in 2015/16 and 7% in 2016/17 is likely to prove damaging to this fledgling sector. Fleets are the main purchasers of electric vehicles and the removal of a key financial incentive will make these vehicles less attractive to businesses.
"Given that fleet companies purchase more than half of all new vehicles registered in the UK each year, the decision not to reinstate the first year capital allowances for leased ultra-low emission vehicles is disappointing. The reintroduction of this financial incentive would undoubtedly help stimulate the uptake of these vehicle types in the fleet sector"
Chevin Fleet Solutions
Ashley Sowerby, managing director, Chevin Fleet Solutions, said: "The headline news for fleets is probably the 2% increases in benefit in kind company car tax announced for 2017-18 and 2018-19.
"We would expect fleets to become even more keen than in recent years to identify attractive and viable low-CO2 choices for drivers. These are quite big increases and employers will have to work hard to minimise the impact on employee tax bills. However, they the move will, of course, tend to have a positive impact on CO2- related related factors such as fuel costs."
The Miles Consultancy
Paul Jackson, managing director of fuel and mileage cost reduction specialist TMC, said: "Good news and bad news on fuel costs for fleets. Good because another fuel duty rise was scrapped. Bad because its another sign that the Government thinks energy costs will rise still further in future.
"It's no longer a game of shaving pennies off the price of a litre. The signal from the Budget is that businesses will have to start looking hard at their mileage and expense bills."
David Brennan, managing director at LeasePlan UK, said:"It was pleasing to finally hear a degree of commitment to upgrading the UK's crumbling road infrastructure, with the announcement that £200m will be available for repairing potholes.
"Following a series of unfulfilled pledges from the Government to address a number of concerns which plague drivers. This long overdue investment in the routes that connect our country will significantly help the thousands of businesses that rely on them every day."
"Despite the recent economic growth, it comes as little surprise that the Chancellor has continued his austerity programme for the public sector. Many organisations will look at their fleet as an area for potential savings and consequently, the case for fleet outsourcing is strengthened as the public sector looks for new ways to realise cost savings."
"The Government must deliver certainty, stability and greater financial incentives to the business motorist in relation to Ultra Low Emission Vehicles (ULEVs).
"Whilst petrol and diesel models are becoming more fuel-efficient, in the longer-term increased uptake of alternatively-fuelled vehicles will be an important factor in achieving the Government's increasingly challenging CO2 targets. We cannot rely on manufacturing only to deliver innovations on traditional combustion engine models."
"To date, fuel duty has been frozen for over four years and George Osborne's confirmation today that there would be no further rises until May 2015 was pleasing for motorists. Whilst fuel prices in the UK are still among the highest in the world, it is reassuring to hear the Government's commitment to easing the cost of motoring for drivers and businesses."
"The Budget set out company car tax rates for the years 2017-18 and 2018-19. The appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75 grammes of carbon dioxide per kilometre (gCO2/km), to a maximum of 37 per cent, in 2017-18 and 2018-19."
David Wallace, sales and business development director at epyx, said: "The 2% increases in benefit in kind company car taxation in 2017-18 and 2018-19 will concentrate the minds of manufacturers, fleet managers and drivers on drawing up choice lists that provide the best possible selection of CO2-competitive vehicles. These are tough targets and the industry will have to work hard to meet them.
"In the shorter term, it is positive to see the fuel duty frozen once again in a move that I am sure will be welcomed by all fleets."
ACFO chairman Damian James, said: "The Chancellor has bowed to ACFO's calls and announced company car benefit-in-kind tax rates up to April 5, 2019.
"At meetings with HM Treasury and HM Revenue and Customs' officials, ACFO has repeatedly asked for benefit-in-kind tax rates to be known for what, in the vast majority of cases, will be the entire operating cycle of a vehicle.
"Historically we have only known benefit-in-kind tax rates for three years, and occasionally four years, in advance.
"However, as businesses have moved to longer replacement cycles with company cars driven into a fourth and even a fifth year in some cases, employees have been left in the dark as to what their benefit-in-kind tax bills will be in their final year or two.
"Benefit-in-kind tax rates up to the end of the 2016/17 financial year were already known. Therefore, the decision of the Chancellor to announce rates for 2017/18 and 2018/19 is to be welcomed.
"It means that company car drivers can make their vehicle selection in clear knowledge of what their benefit-in-kind tax liability will be for the lifetime of the car.
We hope that this five-year benefit-in-kind announcement cycle is retained in future Budgets.
"The decision of the Chancellor to maintain the differential between the three lowest company car tax rates -50 g/km, 51-75 g/km and 76-94 g/km - at a higher level for longer than previously announced is also to be welcomed.
"In Budget 2013, the Chancellor said that the differential between the three rates would be three percentage points in 2017/18 reducing to two percentage points in 2018/19. However, in Budget 2014 he changed his mind and said the differential would be four percentage points and three percentage points respectively.
"It is a helpful move and means that employees choosing low emission vehicles will pay a lower rate of benefit-in-kind tax than previously envisaged. It is a positive incentive to choose a low emission company car.
"Nevertheless, the rates announced still mean that an employee choosing a company car with emissions up to 50 g/km, such as an electric car, will go from paying 0% benefit-in-kind tax in 2013/14 and 2014/15 to 5% in 2015/16, 7% in 2016/17, 9% in 2017/18 and 13% in 2018/19, which is a series of steep increases.
"Furthermore, cars with emission levels below 95 g/km are not hugely plentiful at the moment. Therefore, we hope that vehicle manufacturers will continue to focus on introducing more vehicles into these lower tax bandings in the coming years.
"These should not be just niche vehicles, but cars that are wholly fit for purpose for a wide range of fleet applications and lifestyles."
"ACFO is pleased that the Chancellor has cancelled the 1.6p + VAT fuel duty increase scheduled for September 1. However, the move does not stop forecourt prices from rising in the future at the whim of suppliers.
"What the Chancellor really needed to do to give business and consumers a real boost was to cut fuel duty, not simply cancel a planned future tax increase."
Days Contract HIre
Days director Aled Williams said: "The decision to increase benefit-in-kind tax rates by a further two percentage points on company cars emitting more than 75 g/km in 2017/18 and 2018/19 will further encourage fleets to seek out ultra-low emission models whilst always ensuring they are fit for purpose.
"However, in announcing company car tax rates for 2017/18 and 2018/19 the Chancellor is giving little in the way of incentives to employees to select ultra-low emission models.
"For example, an employee choosing a zero emission electric vehicle as their company car in 2014/15 will pay 0% benefit-in-kind tax, but will be subject to a 13% tax rate in 2018/19.
"What's more in 2018/19, the benefit-in-kind tax rate for cars with CO2 emissions of 0-50 g/km will rise by four percentage points to 13% compared with 2017/18 (9%), while the rate for cars with emissions from 51-75 g/km will rise by three percentage points - increases that are more than the rises announced for higher emissions vehicles.
"The move to ever more efficient cars influenced by vehicle taxation was always going to erode Government tax revenues, but surely drivers selecting the very ultra-low emission cars ministers want them to drive should be not penalised unfairly."
"The decision not to increase fuel duty before the May 2015 general election is a welcome move.
"However, to further speed up economic recovery a cut in fuel duty would have been more helpful to businesses across the UK."
BVRLA Chief Executive Gerry Keaney said: "The Chancellor talked about extending support for low emission vehicles, but there is precious little evidence for that in this Budget.
"The electric vehicle market is still in the doldrums, and the current incentive regime isn't working. The new company car tax rates announced today will do nothing to encourage fleets and their drivers to take a risk on this costly and uncertain technology.
"A business driver thinking about choosing an expensive zero-emission vehicle this year will see their company car tax rate rise from nothing to 13% within four years. Their cost of motoring will rise much faster than someone choosing a gas guzzler.
"Any cost benefit this industry might have received from the abolition of the 3% diesel supplement in 2016 has been dragged back and by 2018/19 company car drivers will be contributing an extra £480m in annual tax revenues."
"Poorly maintained and repaired roads are the cholesterol clogging up the vital transport arteries of the UK economy. The Government has realised we have a problem, but providing just an extra £200 million for local authority pothole repairs is not nearly enough.
"Similarly, the road haulage industry needs a cut in fuel duty, not a freeze. The Chancellor likes to talk about tax cuts that also deliver economic growth and therefore greater tax revenues in the long run. This is a classic example that he has chosen to ignore."