Better company car tax for ULEVs needed, says Climate Change Committee

Lord Deben, Chair of the Committee on Climate Change, has written to Secretaries of State Greg Clark and Chris Grayling with recommendations on how the government can meet its Road to Zero Strategy.

Amongst the recommendations is a call to better incentivise the take up of ULEVs with more supportive company car tax.

It says: "Company car tax is failing to incentivise ULEV sales in the short term. Employees in receipt of company cars that are also used in a private capacity are in receipt of a benefit in kind, and are taxed on this benefit accordingly. A finely graduated, best-in-class system is in place for 2020/21 to make sure this tax takes account of emissions, but until then, ULEV tax rates will be increasing from 2018/19 to 2019/20 and there is no tax incentivising the choice of BEVs over PHEVs, suggesting that some customers may delay getting a BEV or long-range PHEV until 2020/21 given the significant drop in tax rate that will occur in that year. The company car tax system should be addressed to avoid BEV uptake stalling until the lower rates come in."

The letter cites a survey conducted for the British Vehicle Rental and Leasing Association (BVRLA), which showed that 42% of senior decision makers in small and medium size businesses who use vehicles would be likely to increase the number of electric vehicles they use if national and local government offered greater support, including tax incentives, free parking and more charging infrastructure.

Commenting on the letter BVRLA Chief Executive Gerry Keaney said: “The BVRLA is pleased to see its call to bring forward the 2% company car tax for ULEVs has been championed by the Committee on Climate Change in its letter to Secretaries of State Greg Clark and Chris Grayling. As our YouGov polling from July this year showed 4 in 10 SME senior decision-makers would be responsive to electric vehicle incentives such as a supportive tax regime, now is the perfect opportunity for the government to align its tax policy with its air quality ambitions and use the Budget later this month to support greener vehicle choices through the uptake of company cars.

“If leveraged appropriately the company car tax scheme has enormous potential to support the government’s ‘Road to Zero’ aims. Unfortunately the present plans to increase the tax on ULEVs before dropping to 2% will undoubtedly put off many fleet managers and drivers from taking up such vehicles. By expediting the shift to a 2% tax rate the Government could provide a much-needed stimulus to the electric vehicle market, which is currently growing at less than 4% per year.”