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Diesel hybrids to escape 3% BIK penalty

Date: 15 November 2011   |   Author:

Diesel hybrid cars will not be hit by the 3% benefit-in-kind band increase that regular diesels incur after HMRC accepted that the new technology is exempt from the tax penalty.

Following an enquiry from BusinessCar, a spokesman for HMRC confirmed that the organisation will be issuing revised advice to fleets after agreeing that the supplement should not be applied to the new breed of diesel hybrids coming through, lead by Peugeot's 3008 Hybrid4, with two 508 models and Citroen's DS5 Hybrid4 following in 2012.

"The 3% supplement cannot apply to a diesel hybrid because s141(3) of ITEPA 2003 [the regulation document] defines 'diesel car' as being 'propelled solely by diesel'," confirmed an HMRC spokesman.

Previous guidance was unclear, and tax expert Jeff Whitcombe of BCF Wessex Consultants was informed by the HMRC's own employee helpline that diesel hybrids would be hit with the 3% increase, although the HMRC has now declared that this is not the case. "We will update our guidance to clarify this in the near future," said the spokesman. He wouldn't confirm when this would happen, only saying it would be "very shortly".

Peugeot was predictably pleased with the news, believing the reduced BIK payments will have an impact upon its vehicles' fleet appeal. The shift sees monthly BIK payments on the new 3008 Hybrid4 model fall by £26 per month for drivers on the 40% tax rate.

"With a product like the Peugeot 3008 Hybrid4, that is designed to reduce its environmental footprint, the Government taxation incentive at 10% (as opposed to 13% for solely diesel cars) is essential to encourage a shift towards products that have a lower CO2 output - so to have this development recognised is very welcome," said Peugeot fleet boss Phil Robson.

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