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PRE-BUDGET '08: ACFO's statement

Date: 25 November 2008

Julie Jenner, ACFO, Chairman

ACFO, the industry body for fleet and transport managers, has analysed the Pre-Budget Report and this is chairman Julie Jenner's response:

Chancellor Darling's much-leaked Pre-Budget Report contained few enough surprises but has provided some cost relief for fleets on future Vehicle Excise Duty rates.

While recognising the need to link higher-emitting vehicles with appropriate taxation, ACFO has consistently lobbied Government to avoid retrospective taxation, and only to apply new rates of VED on new vehicle procurement after the announcement of the rates. ACFO therefore appreciates the schedule of new car groups and VED rates announced in the March Budget has been deferred, with only relatively modest increases indicated for next year.

The news on cost of fuel is not so good for fleets as the application of the increased fuel duty rates will effectively offset the reduced VAT-inclusive pump prices. In addition, it is widely anticipated that the announcement regarding AFRs (due 1 Dec) will see a decrease to the current rates.

The impact of the reduced VAT rate appears likely to have little impact on most fleet costs since the majority of VAT on fleet services is recovered by businesses. Those ACFO members who are charities or otherwise unable to recover VAT on fleet costs will doubtless welcome the reduced costs. It will be important for fleets to remember the VAT-rate reduction is for a limited period only, so maintaining pressure on fuel costs through good management practice remains a priority.

The biggest result of the PBR is the publication of information regarding the changes to corporation tax treatment of company cars from April 2009. ACFO welcomes clarification of the transitional rules related to capital allowance reform - all existing leases will continue to be taxed under the current system (but at the reduced 20% pa writing down rate) for a period of some 5 years, so potentially only a very small number of contracts will need to be transferred to the new system.

As widely expected, the new regime will only apply to new leases signed after the rules come into effect, something for which ACFO has persistently lobbied HM Treasury.

ACFO also welcomes the confirmation the flat-rate lease rental disallowance will only apply once in a chain of leases/sub-leases, as this will aid flexibility and costs in the funding supply chain - where the current financial crisis has restricted the credit lines of many fleets.

Overall, the announcements in this PBR seem likely to make only a small - and mixed - impact on most fleet operators, whose pre-occupation remains with the big issues of reduced access to credit lines and a very weak used vehicle market.

Fleet costs remain under severe pressure, and ACFO's networking and knowledge-sharing opportunities for members are expected to provide some opportunities to identify cost reduction techniques.