Hopes were dashed when the Chancellor failed to mention company cars in his speech despite calls from industry representatives for clarity beyond April 2020 when the taxation of all new cars will be based on emissions according to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).
Presently company car Benefit in Kind tax (BiK) levels are only known up until April 2021 and such uncertainty makes budgeting difficult to say the least. However, it could be argued that if BIK rates had been released for 2021 onwards it wouldn’t be unreasonable to assume that the annual escalator in % terms would have continued (for example a 3% increase coming into effect 2019). When the adoption of WLTP was first announced the Government stated that its introduction was not to increase tax revenues and as such the delay in publishing these rates may not be such a bad move as it affords the opportunity for sense to prevail. We will see!
Meanwhile, the government has confirmed that company car Benefit in Kind tax (BiK) and VED will continue to be based on CO2 emissions using the New European Driving Cycle (NEDC) for cars registered before April 2020. Whilst bringing some clarity this announcement will add more complexity to the taxation of company cars.
Van benefit charge
From 6 April 2019 the van benefit charge will rise in line with inflation to £3,430 (from £3,350), with electric vans taxed at 60% of the full charge.
Fuel benefit charge
The multipliers will rise in line with inflation, as follows, with effect from 6 April 2019:
• Van benefit fuel multiplier – £655 (from £633); and
• Car fuel benefit multiplier – £24,100 (from £23,400).
Optional Remuneration Arrangements
Following a consultation, the government has confirmed that it will address two anomalies in the Optional Remuneration Arrangements (OpRA) rules, by introducing legislation to:
• Ensure the amount foregone includes both the cost of the car or van and connected costs, such as maintenance and insurance; and
• Adjust the tax relief of any capital contribution when the car is made available for only part of the tax year.
In essence this means that if an employee is offered a cash alternative to a company car that is of greater value than the relevant “cash” benefit of a company car, and the employee takes the car, then he/she will be taxed on the higher cash amount. This will also result in higher National Insurance contributions payable by the employer. Difficult to see the logic/fairness here.
Capital allowances The special writing down allowance, which is applied to cars with CO2 emissions exceeding 110 g/km will be reduced to 6% (from 8%) with effect from April 2019. Considering that the majority of leasing companies apply an increased interest rate to such cars’ finance rentals to cater for their loss of writing down allowance, we can expect to see the level of interest increase accordingly. Moreover, with many more cars now above 110g/km (thanks to WLTP) this is likely to affect most fleets negatively once more.
Fuel duty
Fuel duty on petrol and diesel has been frozen for a ninth successive year; with duties now 44% less than they would have been had the fuel duty escalator been applied each year since 2011 the average car driver has saved £1,000 and the average van driver £2,500 over that period.
Vehicle Excise Duty (VED) From April 2019, VED for cars, vans and motorcycles will rise in line with inflation.
VED rates for heavy goods vehicles (HGVs) will be frozen once again. However, from February 2019 HGVs that meet the latest Euro VI emissions standards will be eligible for a 10% reduction in the HGV levy, but for other HGVs the levy will increase by 20%, subject to the maximum rate permitted under European legislation.
Following a consultation regarding reform of VED for vans the government has decided to:
• Further develop its understanding of the impacts of WLTP on van CO2 emissions in preparation for the introduction of new rates and bands from April 2021;
• Introduce a 2-category approach based on the weight of the van, with each category graduated by the CO2 emissions of the van; and
• Provide ongoing incentives by introducing a standard rate of £0 for zero emission vans, and an ongoing discount for ultra-low emission and other alternatively fueled vans.
What did we know already?
We thought it worthwhile to recap some previously announced measures that will affect fleets. Company car tax from April 2019 The BiK percentage for all CO2 emission bands will increase by 3% so that the maximum 37% will be applied to cars with emissions of 165 g/ km or greater. For diesel cars that are subject to the 4% diesel supplement the maximum BiK percentage will be applied from 145 g/km.
Company car tax for ULEVs from April 2020 From 6 April 2020 the company car tax charged on ULEVs will be calculated by reference to a car’s CO2 emissions and zero emission range. Accordingly, for ULEVs the BiK percentage of 16% applied in 2019/20 will be reduced in 2020/21 as follows:
• 0 g/km – 2%;
• 1 – 50 g/km – 2% to 14% – depending on zero emission range.
New bands will be introduced for cars with CO2 emissions exceeding 50 g/km; starting at 15% for cars with emissions up to 55 g/km, the BiK percentage will increase by 1% for each 5 g/km band, up to the maximum of 37%.
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