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ON THE MONEY: Good grief, a Budget with a bit of a bang

Date: 26 March 2008

Rupert Saunders

After a few years of comparative calm, the Chancellor's red briefcase contained more than enough this year to keep fleet managers on their toes

From the business car taxation point of view, the last couple of Budgets (and their accompanying Pre-Budget Reports) have been a bit of a damp squid.

Perhaps I shouldn't admit this but, at times, it's been a bit of a struggle to know what to write about.

You certainly couldn't say that about this year's Budget. In fact, it's a bit of a struggle to know where to start.

As our news coverage on page 1 makes clear, the most important strategic point to emerge is the creation of a hidden tax threshold at 160g/km. From next year, all companies will find it more expensive to run business cars with emissions above this band - but whether that leads to a wholesale de-selection of cars from company lists remains open to debate.

And then there is the issue of how senior managers with 'expensive' perk cars will react. Alison Chapman of Deloitte maintains "there will still be a place for high emission cars among the ranks of the executives", while fellow tax-expert Alistair Kendrick believes a significant number may opt-out and go back to owning their own vehicles.

At which point, of course, they would be able to claim the AMAPs rate; now genuinely approved by the Treasury and HMRC at 40p a mile, if you want to remain tax neutral.

“From next year, all companies will find it more expensive to run cars above 160g/km”

Rupert Saunders

The decision to hold AMAPs at their present level has killed off the debate about whether they are a fair reflection of the cost of running a car, at least for the time being. And this despite the current high cost of fuel and the Chancellor's own increases in VED.

Perhaps this was one of the reasons why it was buried away in the sub-text of the Budget, rather than given the prominence it deserved. After all, AMAPs have been under review for the past couple of years.

We know that public sector unions felt they ought to be raised while ACFO argued that they were already too high and were encouraging drivers out of newer, low-emissions business cars. I suspect the Treasury decided that leaving them alone would upset both sides equally and therefore was the least bad option.

The great advantage of AMAPs is that they are simple to understand and relatively simple to administer. For anybody trying to get their head around the complexities of capital allowances and WDAs, this is a tempting prospect.

The fact is, every time the Chancellor tinkers with the business car tax system (and makes it more complex) he pushes more drivers and fleet managers towards the simple option - scrap your non-essential business car fleet and pay everybody 40p a mile.

I am quite sure this is not what the Treasury has in mind and it is not a policy I advocate. There are health and safety issues. What would happen to BusinessCar? How would I earn a living? But you must admit, it has its attractions.