Government advisors demand U-turn on electric vehicle tax
10 July 2012
The Nissan Leaf is currently exempt from company car tax, but will not remain so under future legislation.
A leading Government advisory body has called on the coalition to reverse the decision, announced in March's Budget, to end company car tax and first-year writing down allowance incentives on low-emission vehicles from April 2015.
The Committee on Climate Change (CCC) criticised the Government's removal of the benefits in its Meeting Carbon Budgets - 2012 Progress Report to Parliament released late last month.
In examining the UK's progress towards lowering emissions, it said the move could have a "significant impact on purchases", and the plans "threaten progress" of the sector.
"Given the promise of this sector, the need for early take-up of electric vehicles and the very limited revenue generated by the Budget changes, we strongly recommend the Government should reverse this decision," said the report.
"The Company Car Tax and Business Cars First Year Allowance exemption for EVs should be extended to support the development of the electric vehicle market."
Until the end of the 2014-15 tax year, drivers of vehicles rated at 0g/km of emissions - which for now means pure electric models such as the Nissan Leaf - are exempt from paying any company car BIK tax, while those driving cars under 75g/km, exclusively plug-in electric hybrid models at present, pay a 5% rate.
In the Budget this spring, chancellor George Osborne announced that the minimum rating for any car below 95g/km will be 13% come April 2015, which some commentators have predicted could severely damage the fledgling alternative-fuel market.
The same is true of the removal of the 100% write-down capital allowance band for sub-95g/km vehicles, set to end in April 2015.
The report highlighted the crucial role EVs will play in reducing vehicle emissions to an average of 95g/km by 2020.
The CCC modelling requires battery-electric and plug-in hybrid car penetration to reach 1.7 million vehicles in 2020 - accounting for 5% of all cars on the road and 16% of all new cars registered that year.
The report was also critical of the Government's recent announcement that it is examining the possibility of increasing the motorway speed limit to 80mph: "This would be problematic from a carbon budget perspective, given that it would result in significantly higher emissions than the alternative of enforcing the current speed limit."
The report, which has been submitted to Parliament with a view to influencing policy decisions, also recommended more Government funding for eco-driver training and more provision of information on fuel consumption and efficient driving.
The CCC is an independent body established under the Climate Change Act 2008 to advise Government on emissions targets, and to report on progress in reducing greenhouse gas emissions.
Under the Act, the Government is required to respond to the report by mid-October.
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