Tax increase for company cars is slowing uptake of ULEVs

If the Government is to stand a chance of achieving its Road to Zero pledge of half of all new cars being ultra-low emission by 2030, it must bring forward planned reductions in company car tax rates and provide guarantees it will stay low, the fleet industry has warned.

Company car drivers considering a pure electric or hybrid car face a three-percentage point increase in benefit-in-kind (BIK) tax rates from next April, before rates fall the following year.

The tax cut, from 16% to 2%, from April 2020 for pure electric vehicles (EVs) will save company car drivers hundreds of pounds a year. For a Nissan Leaf, for example, a 20% taxpayer would see their annual BIK bill fall from £1,051 to £131.

BIK rates for hybrid cars will also fall, bringing savings to thousands more company car drivers and incentivising uptake further.

On a Mitsubishi Outlander PHEV, for example, the annual tax bill will be cut by £150 thanks to its electric-only range of 28 miles (WLTP) putting it into a 14% BIK bracket.

The new regime, announced in November 2017, was designed to incentivise the cleanest cars, but now stands accused of holding back take-up.

By bringing forward the 2020 BIK reductions, the fleet industry argues the plug-in market could get a much-needed boost.

“At a time when the Government is desperate to encourage plug-in take-up among all drivers, but particularly fleets as they are the largest purchaser of new cars, then it is essential that a tax regime is in place that encourages that demand,” said John Pryor, the chairman of ACFO, the fleet representative body.

So far this year, 8,980 pure EVs have been registered, compared with 9,030 in the first eight months of 2018 – a fall of 0.6%.

However, when taken together with other ULEVs, Government figures show that 33,792 cars qualified for the plug-in-car grant during the same period, a 32.6% year-on-year increase.

Last year, 53,203 new ULEVs were registered in the UK, up 27% from 41,837 units in 2016. However, they accounted for just 1.7% of all new vehicle registrations – up from 1.2% one year previously and 0.9% two years before.

To achieve the Government’s ambition for at least half of new cars to be ULEVs (sub-50g/km CO2) by 2030, registrations would have to rise 30% year-on-year for the next 12 years.

The BVRLA said the planned three-percentage-point increase in April for ULEVs is “actively disincentivising” the take-up of EVs as company cars and contradicting the ambitions set out in the Road to Zero strategy.

The BVRLA launched its Plug-in Pledge earlier this year, which called upon the Government to support greater uptake in electric and hybrid vehicles through measures such as bringing forward the plug-in company car tax incentives.

The pledge aims to see members’ combined plug-in vehicle fleet size go from 50,000 today to 720,000 by 2025. By that time, vehicle rental and leasing companies will be buying 300,000 plug-in vehicles a year, representing an increase in the industry’s share of annual new plug-in hybrid and pure EV registrations from 36% to 60%.

Mike Hawes, the chief executive of the Society of Motor Manufacturers & Traders (SMMT), said: “Industry supports a consistent, long-term approach to vehicle taxation policy to avoid market distortion and confusion.

“The automotive sector is firmly committed to a zero-emission future and is investing billions in technologies to get there, but this must be matched by government measures including technology-neutral incentives, investment into infrastructure and fiscal and other policy support to encourage uptake of alternative fuel vehicles.”

The Government has committed to maintaining a plug-in vehicle grant in some form until 2020, but it is expected to announce changes to the scheme this month.

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