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Green Tax Will Impact On Demand For 'Greener' Cars

2 April 2009

New tax rules introduced this week will mean that businesses operating car fleets will have to pay around £50 extra tax per year on many cars with low emissions. According to the Finance & Leasing Association (FLA), the changes will increase the cost to leasing companies and their customers of investing in company cars at a time when the industry is facing economic pressures. This could reduce demand for new cars, even those with low emissions below 160g/km of CO2. The introduction of this tax on top of existing taxes penalises businesses for making 'green' fleet vehicle choices.

The FLA, which is the UK's leading trade association for the motor finance sector, estimates that the tax on a mid-range car, e.g. Vauxhall Astra 5dr 1.3CDTi, which has low emissions of 130g/km, will cost a large company car fleet operator an extra £51 per year in tax for each vehicle in the fleet.

Julian Rose, Head of Asset Finance at the FLA, said:

"The Government's own analysis estimates an increased tax burden across company cars of some £210 million per year by 2012/13. This is not only a tax on high emissions cars, but on investment in all business cars. At a critical time it could put further pressure on Britain's car industry."

The FLA has written to the Treasury ahead of the Budget calling for two changes to the policy:

· Allow owners to claim tax allowances over the life of cars with emissions below 160g/km, rather than only over a much longer period of either 20 or 33 years, depending on the applicable rate of depreciation.

· Remove the discrimination against rentals paid by lessees of cars with high emissions. These cars are already penalised by the lower 'writing down' allowances for the provider. Whether a car is leased, rented or bought will have no effect on its emissions.

Julian Rose added, "The FLA welcomes measures that address environmental concerns, but the objective should be to reduce taxes on more environmentally-friendly cars, so that motorists switch from cars with high emissions. It should not mean an overall increase in taxes for all motorists."



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Finance & Leasing Association

Finance & Leasing Association

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