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Modec electric van

Modec electric van: writing down allowance

Plus there’s a rise in free fuel benefit

ALL business van operators and tradesmen should brace themselves for bigger bills.

The Chancellor, Alistair Darling, confirmed the 1p per litre rise in fuel duty from 01 April 2010 – and each year thereafter until 2013 in his Pre-Budget Report.

The cost of fuel will be further compounded by those traders who cannot recover VAT, which goes back to 17.5% from 01 January 2010.

Tradesmen in the building industry will also be affected by hesitant demand thanks to the VAT increase, which Brian Berry, from the Federation of Master Builders, considered “a serious blow for both householders and builders wanting to refurbish properties to make them greener and more energy efficient.”

Company van drivers who receive free fuel on their company vans will also see their tax rise: the van fuel benefit charge increases from £500 to £550.

Elsewhere, the Chancellor provided encouragement for business van managers to chose electric vans. Company van tax on electric vans will be reduced from £3000 to nil from 06 April 2010 to 05 April 2015.

A further encouragement was the announcement of a 100% first year allowance against corporation tax for the purchase of electric vans. The British Vehicle Rental and Leasing Association (BVRLA) said it was working with HM Treasury to ensure the allowance could be claimed by van leasing companies – and the savings passed down to van leasing customers.

However, there was no mention of the government taking action to bring light goods vehicle taxation in line with the current CO2 emission linked taxation already imposed on cars.

“As the European Commission puts increased pressure on van manufacturers for an average CO2 of 175g/km and an average mile per gallon figure of 42.8 from 2014, this is certainly something we could well expect the government to announce in the future,” commented Gary Killeen from contract hire company GE Fleet.

The Chancellor did announce some helpful incentives for small businesses, though. This included holding the rate of small company corporation tax to 21% and an extension of the ‘time to pay tax’ incentive that provides more liquidity for smaller firms.

“Extending the Time to Pay scheme will give small and medium-sized firms longer to spread tax payments, while the extension of the Enterprise Finance Guarantee Scheme will help smaller firms obtain the credit they need to operate,” commented director-general of the CBI, Richard Lambert.

There’s additional commentary on the Pre-Budget Report in our sister title, Business Car Manager. Read the story: Pre-Budget Report increases business motoring costs

Further information

If you need more information on company van tax, or using free fuel, read What is company van tax?