Under the government’s draft Climate Change Bill, which was unveiled yesterday, employers will have to take measures to reduce their carbon footprint. But the issue is unlikely to top the agenda in next Wednesday's Budget announcement, say benefits experts.
Nevertheless, they think Gordon Brown will tinker with the level of tax discounts for green fuels.
The Chancellor announced in his pre-Budget report in December last year that the 20 pence per litre discount that already exists on biodiesel fuels would be extended to the next generation of biodiesel and to any innovative fuels as they are developed.
Since then, he has also consulted on extending the current 40 pence per litre discount for biogas and the level of tax discounts for company cars using high-blend biofuels.
Although Marcus Underhill head of flexible benefits at Vebnet, thinks that the Chancellor will mention the need to reduce carbon emissions, he does not believe employers will be hit with any changes that encourage them to do so.
However, he added that the government might take the opportunity to make tax changes around company cars in the hope that organisations will shy away from continuing to offer them as a perk.
He said: “Looking at employee car ownership schemes (ECOS) there is an opportunity for [the chancellor] if he wants, to do something with the way those structures work to make them less tax effective so that some organisations might move out of company cars.”
Car tax expert, Alastair Kendrick, a partner at Wilder Coe, also believes that the Chancellor may look at linking the level of capital allowances given for cars to how green they are.
“I think the capital allowances relief may be changed to be CO2-emissions based so that how green the car is determines how much tax relief the corporate can claim. I think that's going to be the fundamental change that might happen in the Budget and that may influence how employers fund their vehicles so some of the common funding methods may no longer be viable, such as contract hire,” he explained.
Leslie Fidler, director at Baker Tilly, agreed. “It's likely the budget will give further [green] incentives to businesses such as realigning capital allowances for cars by linking them to carbon dioxide emissions.”
Underhill added that he did not expect the Chancellor to change the taxation rules in relation to car parking, bike-to-work schemes, pensions, employer canteens, or holiday pay funds. However, he did think changes might occur to the levels of tax relief allowed under enterprise management schemes and childcare vouchers.
The budget will be announced on 21 March.
