“ACFO initially welcomed the Budget Statement announcement confirming extension of the Plug-In Car Grant to 2022-23.

“However, ACFO was subsequently dismayed to read in a later announcement by the Department for Transport and the Office for Low Emission Vehicles that the current £3,500 Grant for zero emission vehicles was actually being cut with immediate effect to £3,000, while cars costing £50,000 or more would be excluded.

“ACFO is hugely disappointed that a supplementary note was issued with a key change – the cut to £3,000 – that has a huge impact on many currently popular electric cars.

“Whilst ACFO welcomes the overall Budget Statement, any erosion of the benefits of electric vehicles will impact uptake and this £500 cut goes against the raft of ‘green’ motoring-related initiatives contained in various announcements by the Chancellor.

“The Budget Statement made great play on the Government “getting things done” and it being a “Budget that delivers in challenging times”. Well this cut to the Plug-In Car Grant makes a swathe of electric vehicles more expensive and thus dilutes the benefits.”

ICFM chairman Paul Hollick comments on Budget 2020

“This was dubbed the ‘coronavirus Budget’ by many, but for fleet decision-makers and company car drivers it was a good news Statement that could spur company car demand.

“The Chancellor stamped on speculation that suggested that it would be the Budget that brought to an end the decade-long fuel duty freeze. However, beneath that headline which the national media will focus on it was a Budget that clearly drives fleets and company car drivers further along the ‘green’ road and that essentially means 100% electric vehicles.

“A surprising decision to freeze company car rates for 2023/24 and 2024/25 at already announced, and now confirmed, 2022/23 rates means that fleets and company car drivers can plan for the long-term.

“With company car benefit-in-kind tax rates now known for a full five-year vehicle cycle, which is the norm for some organisations, the Budget could even herald a resurgence of the company car. That’s because many drivers’ decision to opt out of a ‘favourite’ employee perk was driven by tax uncertainty.

“I would have liked the Chancellor to have bowed to leasing company pressure and extended the same 100% capital allowance relief to them as is enjoyed by outright purchase fleets.

“However, overall with the investment in the road network, hundreds of millions of pounds for to support the roll-out of a fast-charging network for electric vehicles and confirmation that the Plug-In Car and Van Grants would be retained at least until to 2022/23 it was a welcome Budget Statement.

“Nevertheless, I would have liked the Chancellor to have confirmed retention of the Plug-In Car and Van Grants perhaps for a year or two beyond the date announced, but fundamentally it is a ‘green’ Budget and clearly signposts the way forward for the fleet industry.”

“The freezing of company car benefit-in-kind tax rates from 2020/21 for the vast majority of employees that already have a company car – or will be taking delivery of a new one prior to April 6, 2020 – is a token gesture. The rise from 2019/20 rates has not been cancelled.

“For employees taking a delivery of a company car from April 6, 2020 the two percentage point reduction in rates in 2020/21 and the one percentage point reduction in rates in 2021/22 before they equalise out in 2022/23 is unlikely to compensate for higher CO2 emissions as a result of WLTP testing.

“Indeed what might occur is that fleets and company car drivers may defer vehicle replacement for the remainder of 2019/20 and wait for the new lower tax rates to be introduced on April 6, 2020.

“The Government has acknowledged that evidence provided to it by the industry during the company car benefit-in-kind tax review showed that CO2 emission figures under WLTP testing were on average 20-25% higher than under the previous NEDC regime and in some cases up to 40% higher.

“It is ACFO’s belief that the reduction in rates for two years is unlikely to compensate drivers fully for the increase in emissions, although it will soften the blow.

“ACFO, in its submission, called for a continuous four-year view of company car benefit-in-kind tax thresholds to give employers and drivers certainty over future bills. However, the Government has chosen to only publish rates up to and including 2020/23. Amid a trend for longer vehicle replacement cycles, it is disappointing that the vast majority of drivers selecting new company car today do not know what their tax bills will be for the whole operating cycle of the vehicle.

“ACFO is pleased that all 100% electric vehicles will be taxed at 0% for 2020/21 before rising by one percentage point in each of the following two financial years. However, again it is a token gesture.

“The number of zero emission cars currently available is miniscule and lead times are lengthy so the real value of the 0% rating will be extremely limited. Most major motor manufacturers have announced plans to introduce numerous plug-in models over the next 18 months and the Government needed to take account of model launches and availability in reforming company car benefit-in-kind tax.

“Consequently, for many drivers plug-in vehicles are not suitable and the arrival of WLTP emission figures means that on ‘normal’ petrol and diesel cars the tax burden, will in most cases, rise. The impact of the change in emission testing on some models is a rise of perhaps 25-30g/km on some models, which pushes those cars into tax bands several notches up than currently.

“Furthermore, most company car drivers choosing a diesel model will remain exposed to the four percentage point supplement applicable to those models as there remains a dearth of RDE2-compliant diesel cars on which the additional tax burden does not apply.
“The Government must understand that many company cars are ‘job-need’ with little vehicle choice. That means drivers of those vehicles, who will in many cases will be high-mileage where the diesel option is best for operational purposes and possibly lower salaried, have no cash allowance option and so a limited opportunity to reduce, or control, their benefit-in-kind tax.

“Overall, ACFO’s belief is that the changes announced are not sweeping enough. The Government had a real opportunity to take a hold and force change much quicker by incentivising the take-up of zero and ultra-low emission cars over the long term. However, it seems to have calculated the amount of money that it wanted to raise from company car benefit-in-kind tax and merely tweaked rates accordingly.

“As a result, over the coming years the Government’s tax take from the company car sector is, ACFO believes, likely to increase. Therefore, far from the implementation of WLTP testing being tax neutral, as the Government initially indicated, it is likely to result in the company car remaining a ‘cash cow’.

“Consequently, more employees are likely to opt out of company cars despite the Government saying that it ‘recognised the value of the company car market in supporting the transition to zero emission technology’.

“That is undoubtedly counter-productive to the Government’s air quality improvement strategy and its push for take-up of zero and ultra-low emission cars to increase. Indeed, as ACFO told the Government employee migration away from company-provided cars to privately sourced cars is shown to increase CO2.

“Moving forward it is vital that fleet operators now talk to their vehicle leasing and fleet management providers as well as their tax advisers and review existing car schemes to reduce the exposure of drivers to rises in benefit-in-kind tax over the long term.”