2008 Budget Update

Budget Update

March 2008
Chancellor Alistair Darling delivered this year’s Budget speech on 12 March. Lex Vehicle Partners has analysed and summarised the implications of this year’s announcement for fleets and company car drivers.

Vehicle Excise Duty

Six new bands to be introduced from April 2009 (making 13 bands in total), providing a more graduated link to CO2 than at present. Up to 100g/km remains at £Nil, with the charge for vehicles with emissions over 255g/km increasing from £400 (2008/9) to £440 (2009/10)
A new first year charge to be introduced for new registrations from April 2010. The charge increases more steeply for vehicles with emissions >160g/km, up to £950 for the highest group. Second and subsequent years revert to standard VED charge.
Lex Comment: The first year charge had been muted and reflects the Government’s intention to influence vehicle choice in relation to higher CO2 emitting cars. More fleet administration is a possibility & a rush to register higher emitting cars before April 2010

Capital Allowances (Business Cars)

Writing down allowances (WDAs) to be based on emissions from April 2009. Cars with CO2 emissions above 160g/km will attract 10% WDA, whilst cars with emissions of 160g/km and below will attract 20% WDA
This effectively creates two “pools” for tax purposes and replaces the current approach of individual tax calculations for expensive cars of £12,000 or more. The new rules apply to new cars from April 2009
Lex Comment: The impact for cars costing over £12,000 is to delay the recovery of capital allowances, due to the “pooled” approach, which will lead to a tax timing disadvantage for organisations claiming capital allowances

Expensive Car Leasing Disallowance
The current disallowance for leased cars costing over £12,000 will be replaced by a disallowance based on CO2. From April 2009, cars with CO2 emissions above 160g/km will attract a 15% net disallowance relating to finance payments. For cars with emissions of 160g/km or below there will be no disallowance.
Lex Comment: This shifts the emphasis on penalising high CO2 emitting vehicles rather than expensive cars. Funding decisions for expensive cars with low CO2 emissions may need to be reviewed in the light of this change – this could result in contact hire becoming more attractive for expensive cars with low emissions

AMAP Rates
The Chancellor confirmed that there will be no changes to the current AMAP rates at 40 pence per mile and 25 pence per mile after 10,000 miles.
Lex Comment: The announcement of a new system was widely expected and still leaves a question mark over a future overhaul of the system. ECO and cash for car schemes appear to live on for now

Company Car Tax
In line with previous Budgets, the Chancellor provided advance notice of the base band for company car for tax year 2010/11 at 130g/km. This is 5g/km lower than for tax year 2009/10 effectively increasing company car tax at most bands by 1%.
Lex Comment: This increase was widely expected

Fuel Duty
Budget 2007 announced fuel duty rates for the next three years, and in line with this policy the rates for 2010 were announced in this Budget.

Standard Road Fuels
The Chancellor responded to economic pressure and postponed the 2 pence per litre fuel duty increase from 1st April 2008 to 1st October 2008. Subsequent increases were announced with a 1.84<