The rise in value-added tax (VAT) announced in yesterday’s Budget could prompt employers to pull forward orders for new company cars to 2010 in order to avoid higher VAT bills.
From 4 January 2011, VAT will rise from 17.5% to 20%.
Julie Jenner, chairman of fleet body ACFO, said: “The increase in the rate of VAT will clearly increase the cost of new cars, fuel and servicing, maintenance and repairs.
“However, the VAT increase taken together with associated changes in VAT disallowance rates, the reduction in capital allowance rates, the reduction in corporate tax rates, the increases in national insurance rates and the changes in personal allowances is likely to trigger vehicle funding reviews across the board.
“Currently, ACFO does not anticipate the collective changes to trigger any widespread favouring of company car purchasing, company car leasing, or any of the myriad of cash alternative options available including employee car ownership schemes or salary sacrifice.
“However, it seems likely there will be some marginal realignment of optimum funding/provision solutions depending on the individual circumstances of both employers and employees. Working out the fine details is likely to take some time, as there are so many little effects that could apply in individual personal and employer circumstances.
“As a result, ACFO anticipates that many fleets will conduct strategic reviews of their current fleet operating methods. Only then will a clear picture emerge as to whether the emergency Budget has had anything other than a superficial impact on the make-up of the UK company car market.”
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