PBR: Stealth tax reappears for environmental diesels

Away from the glamour of chancellor Gordon Brown’s speech, which focused heavily on environmental issues, the treasury revealed that it would be withdrawing the waiver of a 3% diesel supplement for environmentally friendly diesel company cars.

From 6 April 2006, this waiver is being stopped for diesel cars that meet Euro IV emission standards, which are targeted at reducing environmentally damaging emissions, such as carbon monoxide, from engines.

The waiver had originally been introduced to encourage early take up of the technology by company car users. However, the standards stated by Euro IV will become mandatory for all new diesel cars registered from 1 January 2006.

The government therefore has argued that the waiver is no longer necessary. The waiver will, however, be retained for the life of company cars that meet the standard and were registered before 1 January 2006.

‘Many employers have over recent years significantly revised their company car policies to encourage employees into diesel cars,’ said Alistair Kendrick, a director at Ernst & Young.

‘The chancellor’s announcement will now leave employers red-faced, having structure deals around diesel cars, and having to consider if such a policy should apply post-2006.’

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