On fuel duty

I was pleased to see that the level fuel duty was left unchanged.

With low oil prices, it would have been tempting for the chancellor to increase the rate of fuel duty to raise revenue, particularly as the current rate of duty has been held since March 2011 when prices at the pump were higher than they are now.

As a firm we act for a number of the region’s largest transport and manufacturing clients where road fuel either directly or indirectly accounts for a significant proportion of their costs and so this news is welcome, particularly at a time where they are facing other pressures on their cost base such as the introduction of mandatory work place pensions.

On low emission cars

Whilst it is welcome that government announced that they will extend the 100% First Year Allowance (FYA) for businesses purchasing low emission cars for a further 3 years to April 2021 they have made the relief more difficult for businesses to access by tightening up the definition of a low emission car.

Up until 2008, this FYA was available for new cars omitting 120g/km CO2 or less. Between 1 April 2008 and 31 March 2013 only cars with emissions of 110 g/km of CO2 or less qualified for the allowance. From 1 April 2013 the CO2 emission requirement fell further to 95g/km CO2, and from 1 April 2015 it fell yet again and is where it currently stands at 75g/km CO2 or less for the 2015/16 tax year. It was today announced that from April 2018, to qualify for this FYA new cars will have to emit emissions at or below 50g/km CO2.

At such a low level the relief may well now only apply to electric vehicles as even those employing hybrid technology may struggle to get below the limit from April 2018. With the appetite for such vehicles still low it is unlikely that many businesses will utilise the relief.

In addition, it was also announced today that the emissions limits that determine the speed at which a business gets tax relief for the cost of purchasing a car are being tightened from April 2018.

Currently if a car does not meet the criteria to be treated as a low emission vehicle then the next CO2 emission threshold to be concerned about is 130g/km. Up to this limit relief obtained more quickly than is the case if emissions exceed this amount. However from April 2018 this limit is being reduced to 110g/km.

So in summary, whilst the tone of announcements is positive, one has to question whether vehicle manufacturers will be able to keep up with these new lower thresholds and offer businesses a choice of vehicles that meet the new criteria and that they wish to buy.

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