Alastair Kendrick, Tax Consultant at Wilder Coe, comments that life goes on !

Gordon Brown in what was possibly his last budget prior to his promotion to Prime Minister made no radical announcements on the taxation of company cars. What was welcomed was the fact that we have relative certainty over the taxation of company cars and fuel which gives considerable comfort to those changing their company vehicle. The fact we have seen no major change in the car tax and fuel benefit rules for some time is good news. It is also welcome to learn that again fuel duties are to be frozen to 1 September.

It is clear that the Government is committed to getting us driving cleaner vehicles and this is evidenced by the changes to the VED rates which penalises those who drive vehicles with the worst CO2 emissions whilst removing the fee on the most clean vehicles. It is unlikely that these changes will have any major impact on fleets. It will be interesting though to see if the residual values of some of the vehicles with a high CO2 emission will fall making ‘whole life’ costs higher. It will also worth seeing what manufacturers will do to the challenge of introducing cars with sub 120 CO2 emission vehicles by 2008 so that the benefit in kind of 10% can be obtained.

There are some very interesting points raised in a number of the reports released at the time of the budget the aspects that I feel worth mentioning are:

• The latest impact assessment on company car taxation shows that Government policy is working and that employees when changing vehicles are minded (in at least 60% of cases) of how taxation of cars work and to go for vehicles with lower CO2 emissions. The report also shows that the number of company car drivers continues to reduce and now stands at a figure of 1.2 million. In addition there continues to be a reduction in the number of employees who receive free fuel. The impact on this is a reduced tax revenue.
• The previous impact assessment which was published 2 years ago and suggested the Revenue would be reviewing the tax free mileage allowances paid to those employees who use their own vehicle on business travel (AMAP relief). This point is not mentioned in the latest report and it could therefore be concluded that this is no longer an issue. A report published yesterday by the Treasury suggests the Revenue will be reviewing Employee car Ownership Schemes. This report does not specify the scope or timing of such a review.
• After much pressure from certain quarters the Government announcement a consultation process was to start on the corporate taxation of company cars. It will be interesting to watch this space to see what impact this may have.

In conclusion whilst there was little new in the budget in the area of company cars there was the clear message that they want us to become ‘greener’ and employers do need to start thinking what they can do in this regard in their company car policy.

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A hugely experienced tax professional, Alastair Kendrick joined Wilder Coe in 2005. Alastair has previously been employed at two of the Big Four Firms, totalling more than 17 years, and he spent almost 20 years working for the Inland Revenue where he was involved in the full range of tax compliance work and worked as a HM Inspector of Taxes.

His experience has seen him deal with large tax investigations during his time at the Revenue and in the profession and he is a recognised leading expert on company car taxation and works with a number of clients in this area.

A keen media spokesman, Alastair regularly contributes to national newspapers, accountancy journals and fleet press. He is currently involved with a number of representative bodies in respect of the proposed changes being made to the construction industry scheme. In the past he has been involved in issues such as the introduction of the new travel and subsistence rules and the introduction of self assessment.