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Acfo criticises 'token gesture' by government over BIK rates

Date: 10 July 2019   |   Author: Sean Keywood

The company car tax rates announced by the government for the years up to 2022-23 have been criticised by fleet operator organisation Acfo.

The government revealed the rates yesterday, following a review on the effect of the new WLTP vehicle testing regime on CO2-based BIK tax bands. 

It has said that cars registered before 6 April 2020 will be frozen at the previously announced rate for 2020-21, through the 2021-22 and 2022-23 tax years. Meanwhile, rates for cars registered from 6 April 2020 will start two percentage points below the previously announced 2020-21 rates in that year, then increase by 1% each year until they are level in 2022-23.

This is with the exception of zero-emission cars, which will gradually increase from 0% to 2% whenever they are registered. 

Reacting to the announcement, Acfo director Caroline Sandall said it was disappointing that for company car drivers who get a new car before 6 April, the scheduled rate rise from the current tax year still applied.

She said: "The freezing of company car BIK tax rates from 2020-21 for the vast majority of employees that already have a company car - or will be taking delivery of a new one prior to April 6, 2020 - is a token gesture. The rise from 2019-20 rates has not been cancelled. 

"For employees taking a delivery of a company car from 6 April 2020, the two percentage point reduction in rates in 2020-21 and the one percentage point reduction in rates in 2021-22 is unlikely to compensate for higher CO2 emissions as a result of WLTP testing.

"Indeed what might occur is that fleets and company car drivers may defer vehicle replacement for the remainder of 2019-20 and wait for the new lower tax rates to be introduced on 6 April 2020." 

Sandall pointed out that the government had acknowledged industry evidence showing that that CO2 emission figures under WLTP testing were on average 20%-25% higher than under the previous NEDC regime, and in some cases up to 40% higher.

She continued: "It is Acfo's belief that the reduction in rates for two years is unlikely to compensate drivers fully for the increase in emissions, although it will soften the blow.

"Acfo, in its submission, called for a continuous four-year view of company car BIK tax thresholds to give employers and drivers certainty over future bills. However, the government has chosen to only publish rates up to and including 2022-23. 

"Amid a trend for longer vehicle replacement cycles, it is disappointing that the vast majority of drivers selecting new company cars today do not know what their tax bills will be for the whole operating cycle of the vehicle." 

Sandall added that while the 0% rate for electric company cars next year was welcome, there were still problems.

"The number of zero emission cars currently available is miniscule and lead times are lengthy so the real value of the 0% rating will be extremely limited," she said. 

"Most major motor manufacturers have announced plans to introduce numerous plug-in models over the next 18 months, and the government needed to take account of model launches and availability in reforming company car benefit-in-kind tax.

"Consequently, for many drivers, plug-in vehicles are not suitable and the arrival of WLTP emission figures means that on 'normal' petrol and diesel cars the tax burden will, in most cases, rise."

Sandall concluded that overall, Acfo felt the measures announced by the government were not sweeping enough. 

She said: "far from the implementation of WLTP testing being tax neutral, as the government initially indicated, it is likely to result in the company car remaining a 'cash cow'.

"Consequently, more employees are likely to opt out of company cars despite the government saying that it 'recognised the value of the company car market in supporting the transition to zero emission technology'.

"That is undoubtedly counter-productive to the government's air quality improvement strategy and its push for take-up of zero and ultra-low emission cars to increase. Indeed, as Acfo told the government, employee migration away from company-provided cars to privately sourced cars is shown to increase CO2."