THE darkness surrounding the future of benefit-in-kind company car tax is due to be lifted.
Phil Killingley, deputy head of the Office for Low Emission Vehicles (OLEV), promised company car tax clarity was imminent.
Killingley, who was speaking at the recent ICFM Conference (May 21, 2019), said that HM Treasury recognised the uncertainty and wanted to get an announcement out as soon as possible.
Current company car tax rates have only been published until the end of 2020/21. It has left fleet managers and fleet drivers in a benefit-in-kind limbo.
“Having uncertainty on benefit-in-kind tax rates beyond 2021 is recognised. I’m hoping there will be clarity very soon.”
Changes to future company car benefit-in-kind tax rates will take account of the Worldwide harmonised Light vehicles Test Procedure (WLTP) for measuring car emissions and fuel economy. These have increased values by some 20%.
But company car demand to spike in 2020/21
Despite the government-induced uncertainty over benefit-in-kind, it is predicted that company car demand will hit a peak in 2020/21.
This coincides with favourable company car tax rates for fully electric and plug-in electric hybrid vehicles.
According to Harvey Perkins, director of tax consultancy HRUX, tax rates on vehicles with CO2 emissions between 0-50 g/km are 16%; and for those with emissions of 51-75g/km are 19% .
However, in 2020/21 vehicles with emissions of 0-50g/km will incur a tax rate of 2-14% depending on zero emission range and those with emissions of 51-74g/km will span the 15-19% range.
Perkins said: “The rate of attrition of tax rates is too high and the implication is that, while company cars were a good deal two or three years ago, now they are now a terrible deal.”
However, that will change with favourable rates for ultra low emission vehicles. “Drivers will spend more money in Starbucks than in company car tax if they have a pure electric car. It is really an unbelievable deal.
“Company cars with CO2 emissions below 75gkm make sense. 940,000 company cars on the road is now the baseline. I think demand will spike in 2020/21, but then it depends on what the government does in terms of company car tax rates and that we just don’t know.”
Which leaves the ball back firmly in the government’s court. And with Killingley’s promise that we will know new company car tax rates soon.