A fair and transparent approach to car taxes

The Government must use the forthcoming Pre-Budget Report to clear up all remaining uncertainty surrounding the major Corporation Tax Review planned for April 2009. In its consultation with the Treasury, the BVRLA has called for clear guidance that will enable businesses to plan their vehicle funding and acquisition strategy in confidence. The key areas where clarity is required are:

Transitional Rules – businesses need to know how long cars purchased or leased before April 2009 will be ‘grandfathered’ in the current regime

The Lessee Chain – we need confirmation that only the final customer in the lease chain is subjected to a lease rental restriction (LRR). This would remove the current, unintended consequence of the proposed tax review, where all the parties in a lease chain are hit by the LRR

“Clearly the current economic climate rules out any significant reduction in motoring taxes,” said BVRLA director general John Lewis. “But by giving us some clarity on its tax strategy, the Government can help businesses plan with a bit more confidence during these turbulent times.”

While the association doesn’t expect lower tax bill, it is calling on the Government to make it more equitable:

By reducing the scale of the planned increases in VED for existing higher emission cars (over 180 g/km CO2)

By removing the unjustified 3% diesel supplement from company car and fuel benefit-in-kind taxation

“We can understand the Treasury’s argument for increasing VED for new higher polluting cars, but we feel the scale of the rise is unfair on people who have already purchased cars expecting to see the traditional inflationary increases in excise duty,” said Mr Lewis.

“Taxing vehicle owners for a decision they have already made will only work if they are given some form of scrappage incentive scheme that encourages them to buy a lower emission model instead,” he added.

“With today’s modern diesel engines there is no justification for a 3% supplement in BIK taxation. The government has already got rid of the diesel supplement in VED, it needs to do the same with company car tax.

“The emphasis here is fairness, not tax cuts. The Government can do what is right and still maintain its overall tax revenues by recalibrating rates.”