Policy Area

Business Car Taxation

Read the BVRLA's submission to the Chancellor here.

The motoring and company car tax regimes have proven hugely effective in recent years, both in raising revenues for the Government and in providing a ‘carrot and stick’ tool for encouraging drivers to use vehicles that emit less CO2. Fleets are responsible for more than half of all new vehicles registered each year and, unlike many consumers, base their purchasing decisions on rational, cost-based criteria.We believe that the following policy measures could have a major long term impact by securing government tax revenues while hastening the move towards ultra-low emission motoring.

Harmonise CO2-based tax thresholds

The multiplicity of CO2 bands and thresholds within the tax regime is confusing and misleading. Although the definition of what qualifies as an ultra-low emission vehicle will necessarily change over time as technology advances, the Government should attempt to produce a single guideline figure at any one time and apply this across the whole tax regime.

In-life incentives for plug-in electric vehicles

The total cost-of-ownership of any fleet vehicle is based upon its operational costs (fuel, insurance, maintenance, etc.) and residual value (price achieved when the vehicle is sold-on to a second owner) as well as its initial price.Until now, government incentives to boost uptake of plug-in electric vehicles have focused on subsidising the initial price of these cars and vans rather than making them more attractive to drive and operate for a first, second or third owner. We suggest that the Office for Low Emission Vehicles consider offering a similar range of in-life incentives to those that have proved so popular in Norway and California, including free parking, subsidised toll or congestion charges or use of ‘green lanes’ in heavily congested areas.

Grey fleet and AMAPs

Unlike the rest of the Government’s motoring tax policy, the current use of Authorised Mileage Allowance Payments (AMAPs) gives employees no incentive to use lower emission vehicles or alternative, more sustainable forms of transport. According to Government estimates, there were 2.5 million claimants of AMAPs in 2011/12 and the increase of the payment rate of AMAPs from 40p to 45p per mile in the 2011 Budget may have led to an even greater reliance on the grey fleet.Grey fleet mileage is prevalent in the public sector, with many organisations making payments higher than the national AMAP rate. As well as being inconsistent with the Government’s green agenda, this is a huge, inefficient and often unaccounted for waste of taxpayers’ money.We propose that a new AMAP regime is considered, possibly providing greater payments for lower mileage in privately owned vehicles, but reducing payments as mileage increases.

Road pricing

Fuel duty is responsible for around £25bn worth of tax revenue per year, but the income from this and other forms of emission based taxation will reduce as vehicles become greener.Road pricing is not a new concept, but the advent of cheaper, more advanced technology makes it simpler solution to this problem. A national road pricing system could target congestion by imposing higher charges for popular stretches of road at the busiest times, thereby giving some road users the opportunity to amend the times of their driving according to a balance of necessity and cost. Charging rates could also vary according to emissions standards, thereby maintaining the ‘polluter pays’ principle, and incentivising lower emissions vehicles. Such a system would need to be a tax-neutral replacement for other fiscal sources of revenue.

 

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