News Story

A fleet-friendly tax regime can get car emissions back on track

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The BVRLA has written to the Chancellor ahead of the Spring Statement to make clear how working with the fleet sector to develop a fair and well-signposted Company Car Tax regime can encourage drivers to choose greener, cleaner vehicles.

With a more progressive tax environment, the BVRLA believes that the vehicle leasing sector – the UK’s largest source of new car registrations - could revive the electric vehicle market and reverse the recent increase in average new car CO2 emissions.

Recent data from the SMMT has shown that average new car CO2 emissions have started rising for the first time in almost 20 years. It also showed that sales of pure electric cars have fallen by a third in the first two months of 2018 compared to the same period of 2017.

The BVRLA believes that the Government can help turn around both these trends by making some adjustments to the Company Car Tax regime.

“Our members are keen to accelerate the uptake of newer and more efficient vehicles and are already responsible for the majority of plug-in registrations,” said BVRLA Chief Executive, Gerry Keaney.
“They tell us that the current Company Car Tax regime is making these vehicles less attractive to employees.”

In its letter, the BVRLA has urged the Chancellor to accelerate the introduction of the Government’s 2% Company Car Tax band for zero-emission vehicles. This tax band is currently scheduled to increase over the next two years to a high of 16% in 2019/20, before dropping to 2% the year after. There are signs that the current tax rate is putting the brakes on new EV registrations from company car drivers, who are postponing the jump to electric until the tax regime offers an incentive.

BVRLA members would also like to see further clarity on Company Car Tax rates beyond the 2020 tax year. The association believes that many people are abandoning their company car and making their own arrangements due to uncertainty over what their tax bill will be in the future. 

Company cars have some of the lowest carbon emissions on UK roads, largely because many firms set a maximum CO2 limit and Company Car Tax payers are incentivised to choose low or zero emission models.

The BVRLA believes that recent changes to the Company Car Tax regime have reduced the impact of these incentives and encouraged many employees to leave their company car scheme and either lease their own vehicle or use an existing household one. The latest BVRLA figures for Q4 2017 show that the business lease fleet shrank by 2% year-on-year, while the personal lease market grew by 20% in the same period, evidencing the trend of people moving away from company cars.

BVRLA member data shows that this can have a huge impact on CO2 emissions, with the average new personal lease car emitting 125g/km of CO2, 14% more than its new company car equivalent, which has average emissions of just 110g/km.

“With frequent and well managed fleet replacement cycles, BVRLA members are responsible for nearly 50% of new car registrations,” added Keaney.

“We want to work as a constructive partner with government, delivering a rapid shift to zero-emission motoring, while recognising the need to sustain tax revenues.”

The BVRLA press release can be read in full here.