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EXCLUSIVE: Euro5 diesel tax breaks on card for April '08

Date: 26 July 2007   |   Author: Guy Bird

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The widely disliked 3% diesel company car tax penalty could be ditched for Euro5-compliant engines as early as April 2008 if Treasury hints prove correct.

Favourable future treatment of Euro5- and Euro6-compliant diesel engines was mentioned in the 2007 Budget report and a Treasury spokesman admitted to BusinessCar that tax breaks for cars and small vans are currently being seriously considered with an eye to a possible announcement in November's Pre-Budget Report. The spokesman went on to say that confirmation in the March 2008 Budget and implementation in April 2008 (to coincide with the next tax year) would be a typical time frame.

Given that the Euro5 standard is not due until September 2009 for all newly introduced models of car, January 2011 for all new registrations and January 2012 for heavier two-tonne plus MPVs, 4x4s, LCVs and special needs vehicles, it would give an almost three-year window for early-adopting clean diesel drivers.

Such a move would be in line with the timing of the previous 3% tax diesel penalty waiver for Euro4-compliant cars announced a few years in advance of that emissions standard becoming mandatory for all new cars in January 2006. That decision accelerated cleaner diesel engine model introductions by manufacturers and if the Euro5 waiver is introduced next spring, unlike last time, there would already be several qualifying models on sale.

However, the Treasury spokesman did caution that the 3% waiver was only one of several tax breaks being evaluated and that "the when, what and if" of the considerations were "all still up for grabs".

Tougher Euro6 emissions limits have been outlined for 2014 and early-qualifying vehicles can also expect tax breaks - but such incentives won't kick in until some time after 2011 when the Euro5 standards have become mandatory for all mainstream new cars, the point at which new diesels will lose their waiver.