Budget 2014: Looking back at the business transport cost changes and effects

If VBC, FBC, BIK or ECA play any part in your business finance planning and operation then recent Budget announcements should be of interest to you. In the March 2014 Budget, whilst confirming the fuel duty freeze (including scrapping the 2p per litre increase that was due in September 2014), the Chancellor, George Osborne, also announced that the Fuel Benefit Charge (FBC) multiplier for both cars and vans will increase in line with inflation, measured by the Retail Price Index (RPI) from 6th April 2015.

He also announced that the main Van Benefit Charge (VBC) rate will also increase in line with the RPI from 6th April 2015. The Government will also extend VBC support for zero emission vans to 5th April 2020 on a tapered basis. In 2015-16 the VBC rate paid by zero emission vans will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20, with the rates equalised in 2020-21. The Government added that it will review VBC support for zero emission vans in light of market developments at Budget 2016.

In addition, there is increased pressure on fleets to adopt lower-emitting company cars with the 2% increase in Benefit in Kind (BIK) tax for 2017-18 and 2018-19. This move means that the CCT bands for cars emitting over 75g/km will increase 2% to a maximum of 37% for both these years. From April 2015, two new BIK bands will be introduced at 0-50 g/km CO2 and 51-75 g/km CO2. The appropriate percentage of the P11D price subject to tax for the 0-50 g/km CO2 band will be 5% in 2015-16 and 7% in 2016-17.

The 100% First Year Allowance (FYA) for businesses purchasing the lowest emissions vehicles has already been extended until 31 March 2018. The Chancellor also extended the Enhanced Capital Allowances (ECA) for zero emission goods vehicles to 31 March 2018, but to comply with EU state aid rules, the availability of the ECA will be limited to businesses that do not claim the government’s Plug-in Van Grant. No news yet on whether rental companies will be able once again to claim 100% FYAs for electric vehicles.

Since 1 April 2014, Vehicle Excise Duty (VED) rates have increased in line with the Retail Prices Index (RPI). According to previous announcements, the Government has shelved its plans to reform to the structure of VED bands for cars and vans in this Parliament. From 1 October 2014, motorists will be able to pay their VED by direct debit annually, biannually or monthly, should they wish to do so. A 5% surcharge will apply to biannual and monthly payments. A paper tax disc will no longer be issued or be required to be displayed on a vehicle windscreen.

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