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UK Fleet Group Urges End of EV Tax Hike

February 25, 2014

Ambitious government plans to make the UK the world leader in electric car adoption could be hampered by its decision to increase company car benefit-in-kind tax on those vehicles by 500 percent in 2015/16 with a further rise due in 2016/17. Zero-emission electric vehicles are currently 0 percent rated for company car benefit-in-kind tax, but fleet-decision-makers’ organization Association of Car Fleet Operators' (ACFO) recent Electric Vehicle Seminar heard that fleet demand could be hit by HM Treasury’s decision to increase the charge on models to 5 percent in 2015/16 and 7 percent in 2016/17.

Corporate demand for electric vehicles is rising, and the 2013 launch of the BMW i3, which fleet chiefs had an opportunity to drive at the Seminar on Tuesday, February 18, at BMW Oxford – the home of the Mini – is seen by many, including ACFO chairman Damian James, as a potential “game-changer” in fleet demand for zero emission cars.

ACFO said it has already called for the Government to reconsider the rise in benefit-in-kind tax on electric vehicles in its 2014 Budget Statement on March 19.

At the seminar ACFO director Phil Redman called on fellow fleet decision-makers to talk to their MPs about the benefit-in-kind tax rise as it “will act as a dissuader” to demand.

“ACFO has put pressure on the Government and we want fleet managers to do so as well. The tax rises should not be coming in before 2020 to enable electric vehicles to become established,” he said. “We need to remind HM Revenue and Customs that electric company cars are on long-term retention, perhaps four, five or six years. To establish the market, the tax rise should be delayed and employees also need to know the tax position well into the future so as fleet managers we can convince them that they are the right vehicles to have.”

Anna West, head of consumer initiatives at the Government’s Office for Low Emission Vehicles (OLEV), which is charged with encouraging the adoption of ultra-low emission vehicles, said the Government was committed to maintaining a two percentage point differential between the 0-50g/km and 51-75g/km company car benefit-in-kind tax band in 2015/16 and beyond, but that HM Treasury “was unable to maintain” the 0 percent rate on zero emission models.

According to the ACFO, the Government has established a Plug-In Grant scheme to help the corporate sector and consumers acquire electric vehicles – maximum grants of £5,000 on a car and £8,000 on a van are available.
The car grant scheme – 20 models are currently eligible – was launched in January 2011 and up to the end of 2013, more than 6,700 claims had been made. The van grant scheme – seven models are currently eligible – was launched in February 2013, netting 404 grant claims. The business sector accounts for 47 percent of all grants, according to the ACFO.

Grant take-up last year was 335-percent higher than in 2011 and Redman told more than 110 fleet decision-makers at the Electric Vehicle Seminar.

“The marketplace is changing so electric vehicles have to be a factor on fleet managers’ radar,” he said. “Electric vehicles will always be a niche within fleet operations, but it will be a large niche rather than a small niche.”

According to the ACFO, the OLEV has hinted fleets can expect incentives to remain in place to assist in the acquisition of electric vehicles from 2015.

OLEV said it is currently analyzing responses to a consultation document on how a further £500 million of Government cash might be spent to support the uptake of low-emissions vehicles between 2015 and 2020.

Delegates were told by West that an announcement would be made in the spring on the draft package of support in advance of implementation from April 2015.

We think there will be some form of purchase incentive available from April 2015 so the fleet market is supported in electric vehicle acquisition,” said West. “We recognize that fleets are leaders and we need to get them on board to make sure our agenda to encourage adoption of ultra-low emission vehicles is a success. We have had a fantastic response from fleets so far with almost 50 percent grant uptake being from the business sector. Where fleets lead others will follow.”

The UK Government has forecast that by 2050 it anticipates almost every car and van on the nation’s roads will be an ultra-low emission vehicle – and that implies a huge take-up among fleets and consumers for electric power.

Nevertheless, West said OLEV did not believe there would be a single mobile solution, but a range with pure electric vehicles, plug-in petrol and diesel and hydrogen models among those available. “We are moving towards a zero emission world and we are here to kick-start change,” she said.

The ACFO noted that existing and future electric vehicle purchase incentive schemes are supported by a range of tax incentives that, apart from company car tax, include special rates in relation to Vehicle Excise Duty and capital allowances. However, electric vehicle mileage reimbursement rates for company cars (Advisory Fuel Rates) and privately-owned cars on business trips (Approved Mileage Allowance Payments), despite repeated ACFO requests, remain to be clarified.

“We are working with HMRC to try and develop a new regime and guidance will be published soon,” West told delegates.

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