U turn on 3% diesel BIK removal

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The government is retaining the 3% diesel company car benefit-in-kind tax supplement until April 2021, thus reversing a decision announced in the 2012 Budget.

It had been expected that from April 2016 the 3% supplement differential would be removed thus placing diesel cars on a tax parity with their petrol-engined rivals.

However, amid the ongoing debate over the relevance of the current vehicle emissions testing regime and the moves to introduce a system linked to real world driving, Chancellor of the Exchequer George Osborne reversed the 2012 decision in this week’s Autumn Statement.

He told the House of Commons that the supplement would be retained until new European Union-wide emissions testing procedures would ensure new diesel cars met air quality standards even under strict real world driving conditions.

Retention of the 3% supplement is forecast to raise an additional £1.36 billion for HM Treasury in the five years to 2020/21.

John Pryor, ACFO chairman, said: “ACFO is disappointed that the government has decided to retain the diesel supplement. There will be, ACFO is certain, many fleets and company car drivers that have made vehicle choices based on the fact that they would save cash as a result of the previously announced withdrawal of the supplement.

“Over many years, ACFO has been consistent in its call for clarity and long-term decision-making so that fleets and company car drivers could plan for the future in full knowledge of what the tax burden will be. This government U-turn does not assist that process.”