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  • Revised company car tax for ULEVs

    In addition to managing costs for your company Fleet Insurance, fuel, and maintenance it is important to be on top of tax implications. To ensure that only the cleanest vehicles are benefiting from the lowest car tax bracket, the Government will be introducing additional measures of efficiency to the company car tax rates. As outlined in the 2016 budget, these new tax bands will be announced this autumn, but won’t be introduced until the 2020/21 tax year.

    Company car tax for ULEVs

    Why is the company car tax system being changed?

    The changes are coming about due to the fact that the current CO2-based company car tax system, introduced in 2002, is no longer able to differentiate the lowest emitting models. Developments in technology have been bringing ever-increasing numbers of ULEV vehicles to the market and so the system needs to change to accommodate these and incentivise use of the cleanest possible vehicles.

    Traditionally Ultra Low Emission Vehicles (ULEVs) were identified by transmitting under 75g/km of CO2 and an electric range of at least 10 miles. However, now there are even some diesels that can offer in this range, and also plug-in hybrids can qualify for under the 50g/km tax bracket even though they have a limited electric range and can be driven mainly using their combustion engine. Unfortunately this means that the current company car tax system is not incentivising the use of the cleanest types of vehicle.

    This pushes the case to introduce changes to the company car tax system, whereby the Government can ensure there are clear incentives to utilise only the cleanest of vehicles. Any increase in company car tax bills would negatively impact on a business, so it is intended the amendments will seek to push zero emission vehicles.

    Government targets push forward company car tax changes

    With the Government’s target of ensuring that nearly all cars and vans in the UK are zero emission vehicles by 2050, and nearly all new cars and vans sold having zero tailpipe emissions by 2040, it has been vital to bring in some changes. As the company car market is much more price sensitive and look more at the whole life cost of a vehicle, the Government see this sector as being essential for promoting the widespread take-up of ULEVs.

    What can we expect?

    It is likely that the new company car tax bands for ULEVs will either comprise of a large number of narrow bands tapering between 0-75g CO2/km, or a smaller number of wider emission bands. There are advantages and disadvantages of both methods, so it will be interesting to see which tax model is implemented and the effect on fleet management in terms of increased administration.

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