The Government’s commitment to outlawing petrol and diesel cars from 2040 will see motorists and consumers alike hit with new taxes warn experts.
“There is little doubt though that the Government will come up with an electric charging tax which will impact upon both businesses and the general public”, predicts Mark Cunningham of tax specialists Blick Rothenburg.
Mr Cunningham also feels the Government will make big changes to company car tax rates once it realises the risk tax revenues are under as business moves over to electric vehicles.
“The Government has for some years incentivised the move to low emission company cars through lower taxes and reliefs, but has now started to gradually reduce the incentives that are in place. As the number of electric vehicles in the UK increases we could see further significant changes to capital allowance and the company car tax rates. Ultimately we will see ‘Electric Charging Stations’ being run by the current petrol and diesel suppliers; they will need to provide fast charging and that is when the tax regime will change.
Mr Cunningham’s colleague Alan Pearce, a VAT Partner at the firm, warned that it will be electricity customers as a whole who will bear the brunt as the Government moves to recoup the lost tax revenue. “As the number of electric charging points at commercial locations and at home increase we could see the government increasing the 5% rate of VAT on domestic electricity to compensate for the loss of duty and VAT on carbon fuels”, said Mr Pearce.
Meanwhile, experts warn of legal ramifications if the Government implements new taxes on petrl and diesel powered classics. Robert Johnson, partner at Healy’s solicitors, said, “With the planned ban on petrol and diesel cars the question remains on how this will impact on the classic car industry. Could this lead to a new tax on cars that are currently not subject to the current tax regime such as classic cars? This could result in lengthy legal challenges against the UK government from classic car enthusiasts.”
Currently a litre of fuel costing £1.30 sees 58p go to the Treasury in fuel duty, and 22p in VAT.
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