Critics: U.K. Tax Hike Could Short-Circuit EV Growth

Government plans to make the U.K. the world leader in electric-vehicle adoption could be hampered by its decision to increase benefit-in-kind taxes on company cars in 2015-2016, with a further rise due in 2016-2017, the Association of Car Fleet Operators warns.

Employees with a company car available for private use must pay income tax on the value of the car and the fuel they use, but zero-emissions EVs now are exempt from the tax.

An ACFO seminar is told fleet demand could be hit by the government’s decision to impose a 5% benefit-in-kind tax on EVs in 2015-2016, rising to 7% in 2016-2017.

Corporate demand for EVs is rising, and the 2013 launch of the BMW i3, which fleet chiefs had an opportunity to drive at the seminar, is seen by many, including ACFO Chairman Damian James, as a potential game-changer in fleet demand for zero-emissions cars.

ACFO already has called for the government to reconsider the tax. At the seminar, ACFO director Phil Redman calls on fellow fleet decision-makers to talk to their representatives in Parliament about how the benefit-in-kind tax hike would hurt demand.

“ACFO has put pressure on the government and we want fleet managers to do so as well,” Redman says in a statement. “The tax rises should not be coming in before 2020 to enable electric vehicles to become established.”

He says the revenue and customs department needs to be reminded that electric company cars are on long-term retention of four to six years.

“To establish the market, the tax rise should be delayed, and employees also need to know the tax position well into the future so as fleet managers we can convince them that they are the right vehicles to have,” Redman says.

Anna West, head of consumer initiatives at the government’s Office for Low Emission Vehicles, tells the seminar the government is unable to maintain the tax exemption for zero-emissions models, but it helps the corporate sector and consumers acquire any of 20 eligible EV models with maximum grants of £5,000 ($8,300) for a car and £8,000 ($13,300) for a van.

The car grant was launched in January 2011 and through 2013, 6,709 claims had been made. The van-grant scheme with seven models was launched in February 2013 and 404 claims were made.

The business sector accounts for 47% of all grants.

Redman says EVs have to be a factor on fleet managers’ radar in a changing marketplace.

“Electric vehicles will always be a niche within fleet operations, but it will be a large niche rather than a small niche,” he says.

West says OLEV is analyzing responses to a consultation document on how another £500 million ($833 million) of government cash might be spent to support the uptake of low- emissions vehicles between 2015 and 2020. An announcement would be made in the spring on the draft package ahead of its April 2015 implementation.

“We think there will be some form of purchase incentive available from April 2015 so the fleet market is supported in electric-vehicle acquisition,” West says. “We recognize that fleets are leaders, and we need to get them on board to make sure our agenda to encourage adoption of ultra-low-emission vehicles is a success.”

The government has forecast that by 2050 almost every car and van on U.K. roads will be an ultra-low-emissions vehicle. “We are moving towards a zero-emission world and we are here to kick-start change,” West says.