A pale green budget?
Monday 17 March 2008
Alistair Darling was expected to major on green
measures in his first Budget on 12 March 2008. However, with
the measures such as a levy on plastic bags, a new aviation duty
and proposals to encourage the use of cleaner cars deferred for the
future, coupled some bizarre u-turns on existing policy, just how
green was the Budget?
Plastic bags
The Government is calling on retailers to voluntarily move away
from providing single-use carrier bags. If there is insufficient
voluntary progress by the end of 2008, the Climate Change Bill will
include powers to enable the Government to impose a charge on these
bags. The Government will consult on the operation of the charge
and how to ensure that any money raised goes to environmental
charities. Tax relief will be available on donations to charities
by businesses from money they raise.
Aviation Duty replacing Air Passenger Duty (APD)
A new Aviation Duty will be introduced in November 2009 to
replace APD. Whilst APD was chargeable on a per passenger basis,
the new aviation duty will be chargeable on a per plane basis with
the aim of encouraging airlines to fill their flights.
Company cars
Employers will be encouraged to purchase "greener" car fleets
with the proposals to limit the tax relief available on the
purchase of cars. There is an extension of 100% first-year
allowances on cars with low carbon dioxide (CO2) emissions until 31
March 2013 but with a maximum CO2 level of 110g/km (reduced from
120g/km).
From 1 April 2009 the treatment of all cars will depend upon
their CO2 emissions with decreased allowances at a rate of 10% for
cars with emissions above 160g/km, compared to the normal rate of
20%.
In terms of the tax suffered by employees, the percentages that
are used for calculating the benefit of having a company car will
increase in 2008/09 and again in 2010/11 for all but the "cleanest"
cars. The only company car drivers to avoid these increases are
those driving cars with CO2 emissions under 130g/km who do not have
private fuel provided.
If fuel for private motoring is supplied along with the company
car, there will be tax increases in both 2008/09 and 2009/10, with
promises of more in subsequent years. From 6 April 2008, where a
car's list price is less than £16,900 the tax on the private fuel
benefit will be more than the tax on the private use of the car.
The Chancellor has said that the increases in the fuel benefit
multiplier for 2009/10 and later years will be at least in line
with the retail price index.
Vehicle excise duty
The range of bands for vehicle excise duty will be further
expended from 2009, with the most polluting cars (those with CO2
emissions of more than 225g/km) suffering an annual charge of
£425.
From 2010, a "showroom" tax of £950 will be introduced for cars
with emissions over 160g/km.
Fuel duty
In stark contrast to the above measures designed to change
future environmental behaviour, the Chancellor chose to defer the
planned fuel duty increase of 2 pence per litre in April 2008 until
1 October 2008. Furthermore, he announced that the current duty
differential of 20 pence per litre for biofuels for road use will
cease from 2010 and duty will thereafter be charged at the same
rate as main road fuels.
Ruth Dooley, Tax Partner at Grant Thornton says: "Ditching
the biofuel incentive represents a 'stick with no carrot' approach.
With the removal of this incentive alone set to net the Government
£550m in 2010/11, many will question whether the Chancellor is
really interested in a green agenda or whether his main priority is
using 'green' to camouflage revenue raising measures."
Further information about Grant Thornton's views concerning the
measures announced in the Budget 2008 can be found on
http://www.budgetcomment.com.
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