There are many tax systems that favour cleaner cars, and penalise the less efficient, high CO2 emitting models.
1. Graduated Vehicle Excise Duty (VED)
Based on CO2 emissions, ranging from "free of charge" for the lowest emitters to £435 per annum for the highest. A first year VED rate was introduced in April 2010 which increases the potential maximum VED band to £950 for the first year of registration only.
2. Company car tax
Based on the list price of the car multiplied by between 10% and 35% dependent of the car's CO2 emissions levels. From April 2010 cars with CO2 emissions of 75kg/m or less will attract a 5% charge and cars with zero emission will attract no charge.
3. Class 1A National Insurance Contributions
12.8% of the employee's company car tax (which is based on CO2 emissions).
4. Fuel scale charge
Charge for free fuel for private use based on a fixed rate of £18,000 multiplied by the car's CO2 emissions factor used for company car tax, and hence is the equivalent of a second company car worth £18,000.
5. Fuel costs
Expected to continue to increase into the future. Hence just focusing on the cost elements, cleaner cars produce less CO2, which in turn yields lower Benefit-In-Kind (BIK) tax, lower Class 1A NIC and lower VED. The table below illustrates the actual scale of these taxes for a selection of vehicles with different CO2 emissions levels. Add to this the fuel cost savings of low CO2, high fuel efficiency vehicles and the financial benefits of cleaner cars are substantial.
In addition to these cost issues there is also the consideration of corporate image where investors, suppliers, lobbying groups, customers and the employees are becoming more demanding regarding companies' environmental credentials.
Continued 'free' access to major city centres is also being reviewed with schemes being rolled out that restrict access to high polluting vehicles. Greater London has already introduced a Low Emission Zone (LEZ) with the aim of improving air quality in the city by deterring the most polluting vehicles from driving in the area. Currently, the vehicles affected by the LEZ are older diesel-engine lorries, buses, coaches, large vans, minibuses and other heavy vehicles that are derived from lorries and vans, such as motor caravans and motorised horse boxes. This includes vehicles registered outside of Great Britain. Failure to comply will result in a penalty charge ranging from £500 - £1000 depending on the type of vehicle and non-payment of the charge can escalate into a £1,500 fine.
It is therefore simple to demonstrate the need to operate an environmentally sensitive fleet from a 'good corporate citizen' perspective, one of cost minimisation, and to ensure continued mobility of your employees and products.
All figures based on 2010/11 tax year and 20,000 miles per annum.
