Chancellor Rishi Sunak failed to meet the expectations of finance leaders and those involved in the fleet sector as key announcements expected to affect companies’ fleet management were missing in March’s Spring Statement.
Matthew Walters, head of consultancy services and customer value at LeasePlan, branded the Spring Statement a “damp squib” as finance leaders are now facing forward planning challenges for company fleets as future tax rates remain unknown.
One of the key proposals missing in the Spring Statement was the publication of the Overview of Tax Legislation and Revenue (OOTLAR) featuring tables on the rates of vehicle excise duty, company car tax and employment tax for the next three years, says Walters.
“They didn’t publish an OOTLAR this time around which gave us no foresight on company car tax, it gave us no foresight on vehicle excise duty changes and it gave us no insight into van or commercial vehicle excise duty [which] we were expecting some changes there.”
Company car tax rates
One expected announcement missing from the Chancellor’s Statement was the rate for company car tax for 2025/26. The current tax rate for electric vehicles will remain at 2% until 2024/25 when it is expected to change the following year.
The delay in publishing the future rate is making forward planning harder for finance leaders to effectively manage their fleets and fuel strategy as future costs remain unknown, says Walters.
It is not unusual for companies to take their vehicles on four-year contracts, he says. Without an accurate figure for future rates, “companies are [now] blind to that fourth year [and are] having to make decisions based on year three”.
Walters predicts that updates to company car tax could see the rate rise an extra 3% to 5%. As such, LeasePlan is providing models for customers at both the current company car tax rate and the potentially increased rate.
New road pricing charges
The mass adoption of electric vehicles in the UK is expected to lose the Exchequer £30bn by 2040 from a fall in fuel duty revenue, according to a report by the Tony Blair Institute for Global Change.
One solution the government has proposed to tackle the shortfall is road pricing which could see motorists taxed on their road usage.
However, the long-awaited consultation on the new charge remains missing from the Chancellor’s plans, says Walters.
“We were expecting it last September, it didn’t come. We were expecting it to be signposted in the budget and it didn’t happen. Hopefully, in the summer, we are going to see it.”
The introduction of road pricing is “incredibly decisive” and will be the “biggest change” to the UK’s transportation and motoring system, says Walters.
“This is a massive change and cannot be underestimated. For businesses, for infrastructure, for vehicle manufacturers and fuel companies, it’s a really big shift in terms of how you fairly charge people for the road usage, we assume, on a per-mile basis.”
However, it is unclear what it will mean from a taxation, monitoring, and reporting perspective, he says. There also a lack of clarity around whether the charges will differentiate between electric vehicles and petrol/diesel vehicles, as the latter may still be required to pay fuel duty and vehicle excise duty.
What is clear, says Walters, is the big administrative burden that companies will inevitably face when it is eventually introduced.
Rising energy costs
One announcement the Chancellor did make affecting fleets was the 5p fuel duty cut – worth around £5bn – that will remain until March 2023 in an attempt to deal with the ongoing energy crisis.
However, this relief was short-lived as prices rose above pre-Statement levels in the days following the announcement, says Walters.
All eyes will be on the chancellor at the Autumn Budget to update the fuel duty cut which Walters hopes will see a freeze at the reduced level.
“The temptation for the Chancellor now will be to raise fuel duty by five pence at the budget, and then freeze it and call it a freeze in real terms,” says Walters.
“What I’d like to see from the Chancellor is a little bit more forward-thinking in November, where he actually continues the fuel duty freeze, but at the new rate.”
The lack of announcements for fleets in the Spring Statement means the Autumn Budget should be fuller, predicts Walters.
“We’ve got to get these company car tax tables [as well as] really decent forward planning on fuel strategy and energy strategy because at the moment it’s just not there,” he says.
Companies should speak with their fleet managers or a fleet advisor to anticipate future costs and any changes to fleets.