Tax incentives announced for ultra-low emission vehicles

Incentives for purchasing ultra-low emission company cars are announced in the 2013 Budget, but the scrapping of a 3p rise in fuel duty raises concerns from environmental groups

Businesses are to be given tax incentives for purchasing ultra-low emission vehicles under plans announced by Chancellor George Osborne as part of the 2013 Budget today.

However, campaign group Friends of the Earth has criticised government for not “weaning  our transport system off its oil dependency” as a planned 3p fuel duty rise in line with inflation was scrapped.

Chancellor George Osborne announced the 2013 Budget today, which included tax incentives for ultra-low emission vehicles

There are set to be two new company car tax bands, one for cars with emissions of 0-50g of carbon dioxide per kilometre, and one for cars with emissions from 51-75g/km.

Cars in the 0-50g band will pay 5% tax in 2015/16, rising to 7% in 2016/17, while vehicles in the 51-75g band will pay 9% in 2015/16 and 11% in 2016/17. The incentives and emission thresholds will be reviewed in the 2016 Budget.

The 100% First Year Allowance (FYA) for businesses purchasing the lowest emission vehicles will be extended for a further three years until March 31 2018. From April 2015, the carbon dioxide emissions threshold for FYA-eligible vehicles will be reduced from 95g/km to 75g/km. As previously announced, the threshold will decrease from 110g/km to 95g/km from April 2013.

“We’ll support the manufacture of ultra low emission vehicles in Britain with new tax incentives,” Mr Osborne said in his Budget speech.

RPC discounts

It was also announced that the government will replace Reduced Pollution Certificate (RPC) discounts on Vehicle Excise Duty (VED) for Euro IV-VI emission standard vehicles in the Heavy Goods Vehicle Road User Levy scheme with grants from 1 April 2014 to 31 December 2016.

Further details of the grants will be announced by the Department for Transport shortly, according to the government.

RPC discounts for Euro I-III emission standard vehicles, meanwhile, are to end for vehicles within the HGV levy scheme from April 1 2014, and for all other vehicles of the same emission standard from April 1 2016.

The HGB levy scheme was introduced in February 2013 and charges lorries weighing more than 12 tonnes £1,000 per year for using UK roads.

The Chancellor also announced a cancellation of a 3p per litre fuel duty rise, which had been planned for September 2013. A 3p rise in fuel duty in January 2013 was also previously cancelled by the Treasury.

Refusal

Reacting to the scrapping of the planned 3p fuel duty rise, Friends of the Earth economics campaigner David Powell said: “The Chancellor’s refusal to raise fuel duty in line with inflation has deprived Treasury coffers of £5 billion in the last two years, leaving other parts of the economy to pay the price.

“The driving force behind rising petrol prices is the soaring cost of oil – the sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency.”