Removal of diesel supplement delayed

In the combined Autumn Statement and Spending Review, Chancellor George Osborne has said that the government is delaying the removal of the three per cent diesel supplement on company car tax April 2021.

Following on from the Volkswagen diesel emissions scandal, Osborne said that ‘in light of the slower-than-expected introduction of more rigorous EU emissions testing’ the supplement removal will be delayed from the original date in April 2016 to five years later.

This move may leave company car drivers facing higher tax bills from next April as diesel vehicles will remain taxed higher than their petrol counterparts.

Jenny Powley, RAC Business head of corporate sales, said: “Company car drivers will clearly be disappointed by this announcement, as diesel engines have come a long way in terms of CO2 emissions since the supplement was introduced in 2002. Many company car drivers will have chosen diesel vehicles this year with the expectation that the supplement would be lifted in April 2016.

“Of course recent events surrounding diesel engine emissions and testing processes at VW have changed the perception of diesel in the market place. It seems that the Chancellor has also been influenced by that as the reasons given for the supplement to remain until 2021, is that EU-wide testing procedures should ensure new diesel cars meet air quality standards by then, even under strict real world driving conditions.

“However it would seem unfair to penalise diesel vehicle drivers by extending the Benefit in Kind tax when it was originally based on levels of CO2 emissions, which have improved considerably in the last ten years.” 

Read Osborne’s speech