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What does the Budget mean for fleet operators?

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What does Wednesday's Budget mean for the fleet industry? John Pryor, chairman of ACFO – the Association of Car Fleet Operators – gives his reaction.

The changes introduced to vehicle excise duty (VED) were inevitable, says Pryor.

In his Budget speech, Chancellor George Osborne revealed that the government will completely reform the system for cars first registered from 1 April 2017 onwards.

Nothing will change for cars registered prior to this date; however, the new system will introduce first year rates of VED based on the carbon dioxide (CO2) emissions of the vehicle. And in all subsequent years, there will be a flat standard rate of £140, except for zero-emission cars which will attract a standard rate of £0.

For cars with a list price above £40,000, a supplement of £310 will be introduced on the standard rate for the first five years in which the standard rate is paid.

Pryor says: "The changes to first year VED rates are... understandable as they continue to incentivise the uptake of the 'cleanest' cars from an emission standpoint. However, the standard rate for all cars, with the exception of zero emission models and those with a list price above £40,000, is less easily understood."

A graduated standard rate of VED would have been more in keeping with the drive to lower emissions, which would encourage second owners to drive low emission cars.

On insurance premium tax, which is set to soar, Pryor believes the move could lead to more uninsured drivers.

Increasing Insurance Premium Tax from 6% to 9.5% – a rise of more than 50% – seems to be extremely penal in respect of vehicle insurance, which is a legal requirement,"

"It also places an increased onus on fleet decision-makers to ensure that employees who drive their own cars on business trips are suitably insured for the purpose," he added.

The Chancellor also vowed to "explore the options" for new cars to undergo their first MoT after four years rather than three years; promised further cuts to Corporation Tax and also ruled out any increase in fuel duty this year.

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