Penny Simmons of Pinsent Masons was commenting after a series of climate change-related tax announcements were announced by UK chancellor Jeremy Hunt in his autumn statement on Thursday.
Reiterating calls she made earlier this year, where she said “UK tax policy urgently needs reviewing to manage the significant fiscal risks of the economy’s net zero transition and support both the UK’s transition and global endeavours to combat climate change”, Simmons said “there is a risk that if tax policy and decarbonisation are considered in silos, the UK will either be left with a gaping hole in its public finances in future or that progress towards net zero targets will be slower than necessary”.
One of the changes announced was the government’s plan to introduce vehicle excise duty on electric cars, vans and motorcycles from April 2025. The Treasury said the move “will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate”. Vehicle Excise Duty already applies to petrol and diesel vehicles.
Peter Feehan of Pinsent Masons, who specialises in projects concerning the electrification of mobility, said: “Today’s electric vehicles tax announcement has in many ways been a question of ‘when?’ rather than ‘if’ and indeed will be seen as inevitable. Whether this affects the impetus of increased electric vehicle sales remains to be seen. Original equipment manufacturers will be concerned as to whether this impacts already falling sales.”
“However, the missed opportunity is devising measures which utilise the additional revenue from duty to support much needed electric vehicles charging infrastructure in the UK. Perhaps the silver lining is that the benefits to company car drivers remain, which could be a recognition by the government of the importance of this sector to achieving the government’s transition to net-zero transport,” he said.
As part of its new Electric Vehicle infrastructure strategy, the UK government earlier this year pledged to increase public funding to support the development of new Electric Vehicle charging infrastructure. It was said at the time that the Local Electric Vehicle Infrastructure Fund would provide a total of £450m of public funding “to facilitate the rollout of larger charge point infrastructure projects”
In a document detailing new measures to be announced in the autumn by the chancellor, the Treasury said it planned to legislate a new finance bill next spring to extend subsidies for electric vehicle charging stations for the first year. The 100% exemption will be extended until March 31, 2025 for corporate tax purposes and April 5, 2025 for income tax purposes.
In a report published earlier this year, the Committee on Climate Change called for the government to conduct a net zero tax review to determine how the tax system could best support the transition to net zero.
The Committee on Climate Change provides independent advice to parliament on tackling climate change, explicitly recommending a review of the vehicle tax. Some form of road pricing should be introduced and drivers of all vehicle types will be charged based on how much they drive and when and where they drive.
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