City of London Corp bans diesel as finance bill stalls ULEVs

December 09, 2016

While the most central local authority in London has just banned diesel vehicles, Alphabet, the mobility arm of the BMW Group, has issued a warning that UK government plans will ‘put a brake’ on ultra-low emission vehicle (ULEV) growth until 2020.  

The City of London Corporation, the local authority covering the square-mile financial district of central London, has banned the adoption of any new diesel vehicles in its fleet where an alternative lower emission powertrain can be used.  

However, Alphabet has warned that measures announced by the government in Monday’s Finance Bill will hinder the growth of ULEVs until 2020. Fleets will be disincentivised from purchasing electric vehicles over the next few years until the benefit in kind (BIK) taxation rate – also known as ‘perk tax’ – drops to a new 2% rate in 2020. The BIK rate for pure electric vehicles currently stands at 7% for 2016-17 but the bill revealed plans for the rate to increase to 9% in 2017-18, then to 13% and 16% in 2018-19 and 2019-20 respectively. The BIK rate then plummets from 16% to just 2% from 2020-21 - suddenly making electric vehicles much more attractive.

Chief operating officer of Alphabet GB, Matt Sutherland, told FleetNews: ‘The consequences of these announcements is likely to put a brake on the growth of ULEVs as company cars until 2020. Effectively they are removing the incentives to take a ULEV for the next three years – especially those for low paid, ‘JAM’ workers - workers that are 'just about managing'. 

Nevertheless, the government will legislate in the bill to remove the Income Tax and employer NICs advantages of salary sacrifice schemes. ULEVs will still qualify, and any existing employer-provided car schemes made before April 2017 will be protected until April 2021.  

Vince Dignam, business improvement and performance manager at the City of London Corporation, says it is essential that local authorities like theirs set an example with emissions. This latest initiative to ban diesel vehicles follows plans announced in May aiming to crack down on drivers leaving their engines idling, which followed successful trials in the City of London.  

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