Car makers to fight new tax rules

  • Manufacturers vow to fight BIK rise for electric cars
  • Low emissions cars will pay 13% company car tax
  • Nissan says it strongly opposes rate rise

Motor manufacturers in the UK have vowed to fight the Government’s decision to hike up company car tax costs for zero- and low-emissions cars.

Currently, company car drivers in zero-emissions cars such as the Nissan Leaf and Renault Fluence do not have to pay company car tax, but Chancellor George Osborne announced in yesterday’s Budget that they will pay 13% in three years’ time. That will then rise again, to 15%, in 2016.

The decision announced in the Budget took the manufacturers by surprise because although they were aware the BIK exemption for cars that emit less than 75g/km of CO2 was due to end in 2015, they did not expect it to leap to 13%.

It causes a problem for fleets because the tax burden is based on the P11d values of cars. For the most part, electric cars have high P11d values because they are expensive to buy. That means high company car tax costs. 

Now the manufacturers that have bold plans to expand their electric vehicle line-up, including General Motors, Nissan and Renault, will be lobbying the Government to find a compromise.

A spokesman for Nissan told Parkers: “From the budget statement it appears that the taxation level for EVs is currently proposed to rise to the same level as conventionally engined cars. This is clearly something we would oppose strongly as it would discourage the wider adoption of zero-emission vehicles. We have made contact with the relevant government departments in order to clarify the situation.”

Renault bosses will also be negotiating with Government officials in order to lessen the impact of the rise. The French car maker has invested heavily in low emissions vehicles including the Fluence Z.E. saloon, the Twizy city car and the Zoe hatchback.

“We will be talking with the Government to find out more,” a spokesman explained. “If the figures are correct then this is disappointing. Whilst EVs retain a total cost of ownership advantage, we will be making them aware of the potential impact this will have on the fledgling electric vehicle fleet sales sector from 2015."

General Motors also have a vested interest. Range-extenders such as the Chevrolet Volt and Vauxhall Ampera have official CO2 emissions ratings less than 75g/km, and a heavy company car tax burden could seriously affect sales in the long-term.

Vauxhall is hoping to sell around 2,500 Amperas this year, and 5,000 in the first full year. Around 50% will go to fleet buyers.

A spokesman said: "This is very disappointing. These kinds of cars are in their early stages and we need more time to get them established, and for people to get used to them and their benefits. The Ampera is a real solution for company car drivers because it doesn't have the range limitations of pure electric vehicles. We will be having a word with the Government."

A spokesman for Chevrolet told Parkers: “The vast majority of our Volt sales will be retail so we won’t be affected much, but in the long-term we are planning to introduce more electric-based low emissions to the market, so this is not particularly favourable. GM, along with other manufacturers, will be negotiating with the Government about this issue. It’s not set in stone yet.”

Toyota also has its plug-in Prius which benefits from zero company car tax but the Japanese car maker told Parkers that the new move to introduce higher BIK rates would not cause too many problems for the company.

“In the short-term there might be a bit of drop-off in sales but not in the long term,” said a Toyota spokesman. “This is simply a sign that hybrid cars and low emissions cars are moving into the mainstream."

A spokesman for the Society of Motor Manufacturers and Traders said: “In addition to BIK and the up-front purchase price, buyers are increasingly influenced by the whole-life cost of their vehicle. It is therefore important that there is long-term consistency in taxation to help this developing market grow."

For details on how to calculate your company car tax click here.