budget 2018

Despite clearly being a Budget for business, with significant changes to, amongst other areas, annual investment allowances, extending the New Enterprise allowance and changes to apprenticeship schemes, the Chancellor’s statement1 was remarkably light on detail for fleet managers.

COMPANY CAR TAX BANDS POST 2020/21

We had anticipated some clarification on company car tax bands post 2020-21, a key factor holding the market back. However, disappointingly, no detail was announced. This lack of clarity makes it difficult for fleet decision-makers to plan ahead and build a fleet strategy based around the average 48-month contract, when the tax position of the vehicles is unknown over the term. Orders for diesel vehicles are being delayed for fear of future tax hikes which could make them prohibitively expensive. Equally, the longevity of current tax incentives on electric vehicles will determine whether and when the immediate investment in a lower-emission, alternatively-fuelled fleet will pay off.

It was announced that further information regarding the impact of Worldwide harmonised Light vehicles Test Procedure (WLTP) on Vehicle Excise Duty (VED) and Company Car Tax (CCT) will be reported in Spring 2019. In addition, the Chancellor announced that a response to the consultation on VED reform for vans, which was published in May 2018, will be available shortly. The response will set out proposals to introduce environmental incentives from April 2021. Bands and rates will be set out ahead of the Finance Bill 2019-20.

The Budget included a further announcement that from 1 April 2019 VED rates for cars, vans and motorcycles will increase in line with the Retail Price Index (RPI), with car fuel benefit charges to increase in line with RPI and the van benefit charge in line with the Consumer Price Index (CPI) from 6 April 2019.

CLARIFICATION OF SUPPORT FOR ULEVS AND PLUG-IN CAR GRANTS

For 51% of respondents to our pre-Budget Twitter Poll2, affordability was given as a key reason for the lack of uptake of electric vehicles. The announcement in early October of a £1,000 cut to the plug-in car grant and abolition of the grant for hybrids with range of less than 70 zero emission miles, was unexpected and unwelcome. In order for the Government’s Road to Zero targets to be achievable, we would need to see an almost 23-fold increase in ULEV uptake based on current market share. The availability of desirable, practical plug-in vehicles is important as is the existence of tangible benefits compared with traditional vehicles on a whole-life cost basis. 

As the UK’s largest vehicle leasing provider, we believe we have an important role to play in helping the Government achieve its Road to Zero strategy and supporting fleet decision-makers to embrace electric vehicles.

FUTURE OF MOBILITY UPDATES

How people get around is changing, and there is an increasingly diverse range of mobility solutions for individuals and businesses to choose from.  We expected to see guidance based on the Government’s Future of Mobility consultation, which would have helped provide a standard framework for the safest, most cost-effective and most sustainable decision making, however, this was lacking. What we did see, was that £90m from the National Productivity Investment Fund is to be allocated to the Transforming Cities Fund (which itself is to be extended to 2022-23), to support the creation of Future Mobility Zones. This will trial new transport modes, services, and digital payments and ticketing.

CLEAN AIR ZONES

No specific additional details were provided on Clean Air Zones (CAZs), although the Chancellor has allocated £20 million of additional funding to support more local authorities to meet their air quality obligations, suggesting that no common, centralised framework around the implementation of Clean Air Zones is forthcoming. 

This is unfortunate, as the lack of a common framework from central Government is a challenge for decision-makers operating national fleets. Whilst we appreciate that local authorities need to respond to their own environmental circumstances, a common framework would be very welcome. 

It’s also important for the Government to strengthen the existing electric vehicle infrastructure, including the installation of destination charging in cities and on-street overnight charging facilities. This is particularly the case for those local authorities challenged with implementing ambitious CAZ proposals to combat high levels of air pollution. For many of our Twitter Poll2 respondents, this was a key issue, with 15% saying that the availability of charging points would be a factor in encouraging them to switch to electric vehicles – and 27% citing greater mileage range. The Chancellor did announce the extension of the Enhanced Capital Allowances for companies investing in electric vehicle charge points to 31 March 2023 and repeated the Government’s ambition for the UK to become a world-leader in the ultra-low emission vehicle market.

FUEL DUTY REMAINS FROZEN

Despite indications to the contrary, the PM announced at the October 2018 Conservative Party Conference that fuel duty would be frozen for the 9th consecutive year. This was reiterated by Chancellor Hammond, who stated that the decision will mean that the average car driver will save £1,000 a year and the average van driver £2,500.

CAPITAL ALLOWANCE REDUCTION

Unexpectedly, the Chancellor announced a reduction in capital allowances, from 8% to 6%, for company cars with emissions of more than 110g/km CO2. This will include new and existing vehicles, and means it takes longer for purchasers of vehicles to obtain tax relief on the purchase.

INFRASTRUCTURE INVESTMENT BOOST

Recognising, as the Chancellor pointed out, that “high-quality infrastructure is essential to supporting jobs and economic growth,” additional funding of £28.8bn was announced for the National Roads Fund between 2020 and 2025. A further £240m is to be provided to local authorities to support minor repairs, including to potholes, and £150m to local authorities to invest in small improvement projects to ease congestion locally. 

The extension of the Transforming Cities Fund to 2022-23, also sees an extra £680m available: £240m provided to the six metro mayors for transport investment in their areas, and a further £440m to be made available to the city regions shortlisted for competitive funding.

THE IMPACT OF OPRA ON FLEETS

The Finance Bill published in July 2018 announced that OpRA calculations will revert to 100% cash v car from 6th April 2019. This simplifies current rules, confirming that relevant motoring expenditure, rather than just car finance is included as a taxable cash benefit. However, combined with a rise in Benefit-in-Kind (BiK), this is encouraging some employees to opt out of company cars, leading to an increased take-up of Personal Contract Hire (PCH).

Although many of the areas we anticipated weren’t included in the Autumn Budget 2018, and a lack of clarity remains, our message to fleet decision-makers is clear. Whilst it may be pertinent to hold fire on decisions in the short term, we would encourage you to continue to work towards a greener future. Improvements to air quality remain high on the Government’s agenda, despite the immediate distractions of Brexit, and we are confident that there will be a return to these priorities in the months ahead. 

As the UK’s largest plug-in hybrid and electric vehicle fleet provider, our commitment to the future of electric vehicles is clear. Improvements in the range, availability and capability of electric vehicles continue, making them an exciting and viable part of longer-term fleet strategy.

TAX GUIDE

This guide provides an overview of the changes announced by the Chancellor, supported by easy-to-read tables which display the main personal and corporate tax rates.

FUEL CHOICE & EMISSIONS

For more information about fuel choice, emissions and incorporating electric vehicles into a balanced business fleet, read our Fuel Choice & Emissions whitepaper.

CASE STUDIES

To hear first-hand experiences of investing in electric vehicles from our clients, watch our video case studies: Implementing an electric fleet and incorporating electric fleet infrastructure.

DRIVING TECHNOLOGY

To find out more about the benefits and challenges of adopting new technology and changing the way business fleets operate, visit our dedicated Driving Technology page.

PODCASTS

Download our podcast discussing the future of the business fleet, which features a business fleet manager and prominent vehicle manufacturer.

Contact us

To find out more about any of these issues, watch our website for further updates or contact your Lex Autolease consultant.

Email: fleetconsultancy@lexautolease.co.uk

1 Budget 2018, HM Treasury, October 2018 HC 1629
2 Results based on 5,034 votes from a Twitter poll carried out between 17th and 21st October 2018

While all reasonable care has been taken to ensure that the information in this article is accurate, no liability is accepted by Lex Autolease Limited for any loss or damage caused to any person relying on any statement or omission in this article. This article is produced for information only and should not be relied on as offering advice for any set of circumstances and specific advice should always be sought in each situation.