According to fleet industry bodies, the Government must bring forward its plans for reduced company car tax rates and provide guarantees of a long-term reduction if its Road to Zero pledge - to make half of all cars ultra-low emission by 2030 - is to be met.
Before benefit-in-kind (BIK) tax rates fall in 2020, company car drivers considering electric or hybrid car models are facing a rate rise of three percentage points from next April.
The planned April 2020 tax cut for pure electric vehicles (EVs), from 16% to 2%, is set to save hundreds of pounds annually for company car drivers. BIK rates for hybrid cars are also scheduled to decrease significantly, incentivising uptake and bringing further savings to more company car drivers.
The 2020 tax regime, first announced in November 2017, was created to drive sales of cleaner, environmentally-friendly vehicles. However, the Government is now accused of holding back the potential of the market, with the fleet industry arguing that enforcing the BIK reductions sooner will bring a much-needed boost to the plug-in market.
John Pryor, chairman of fleet representative body ACFO, said: “At a time when the Government is desperate to encourage plug-in take-up among all drivers, but particularly fleets as they are the largest purchaser of new cars, then it is essential that a tax regime is in place that encourages that demand.”
Pure EV registrations declined this year, with 8,980 registered compared to 9,030 during the same eight-month period in 2017 - a 0.6% drop.
Looking at the wider ULEV (sub-50g/km CO2) market, however, Government data showed a 32.6% year-on-year increase in cars qualifying for the plug-in car grant during the same time-span.
While ULEV registrations in 2017 increased by 27% (to 53,203 units from 41,836 in 2016), they accounted for only 1.7% of all new vehicles registered.
For the Government to meet its ambition for 50% of cars to consist of ULEVs by 2030, there would need to be a 30% yearly increase in registrations for 12 consecutive years.
Paul Gishan, CEO at Tusker, said: “Chris Grayling said in July that the Road to Zero strategy ‘sets out a clear path for Britain to be a world leader in the zero-emission revolution – ensuring that the UK has cleaner air, a better environment and a stronger economy’.
“For the Government to stand a chance in achieving this, they need to support company car drivers with lower BIK rates for electric drivers, rather than increasing them next year.”
The BVRLA stated that the upcoming tax rate rise for ULEVs is “actively disincentivising” EV company car take-up and undermining the Road to Zero strategy’s end goals.
Gerry Keaney, BVRLA’s chief executive, said: “By bringing forward the 2% company car tax rate for zero-emission vehicles, the Government would be sending the right market signal, stimulating the new and used electric vehicle market, while at the same time promoting the UK as a place for inward investment.
“Fiscal policy is a powerful and effective tool to achieve the Government’s environmental goals. In particular, there is great potential to use fiscal incentives to leverage the company car market, which is already a key enabler for the early adoption of new technologies.”
Chief executive of the Society of Motor Manufacturers & Traders (SMMT), Mike Hawes, said: “Industry supports a consistent, long-term approach to vehicle taxation policy to avoid market distortion and confusion.
“The automotive sector is firmly committed to a zero-emission future and is investing billions in technologies to get there, but this must be matched by government measures including technology-neutral incentives, investment into infrastructure and fiscal and other policy support to encourage uptake of alternative fuel vehicles.”
Ashley Barnett, Lex Autolease head of consultancy, stated a belief that driving the adoption of ULEVs is easier in the company car market than through personal contract hire, for instance, due to the current targeting of incentives.
Barnett also said that further insight into three-year and four-year BIK rates and plug-in car grants’ future viability would be essential to driving further EV uptake.
“If you buy or lease a valuable asset for a long duration – four or five years – you’d also like to know, with some degree of certainty, what you’re going to be paying without worrying that, part-way through, something out of your control is going to drastically impact that monthly cost. That’s where some of the hesitancy of company car drivers is coming from,” said Barnett.