Under tax reforms planned by the French government, companies will be able to reclaim VAT on petrol used for business purposes. The changes will be phased in between 2018 and 2019 according to energy minister Ségolène Royal. Companies have historically only been able to reclaim VAT on diesel fuel costs, which has encouraged its use by businesses. The new policy is the latest in a series of changes that are designed to remove historic diesel cost advantages. The government is also increasing fuel duty for diesel at a faster rate than petrol to ensure that the two fuels will eventually have price parity at the pumps. Despite the changes, diesel still has a fuel economy advantage over petrol which is important when calculating the total cost of ownership (TCO) for high-mileage vehicles. Also, company car tax in France is based on carbon dioxide (CO2) emissions so drivers will often still incur less tax by opting for low-emission diesels. In the UK, which has equal VAT treatment for both fuels and price parity at the pumps, the majority of company cars are still diesel. However, drivers are showing an increasing interest in petrol/electric hybrids as in some cases the tax liability is lower than equivalent diesels.
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