This Budget gave few surprises for the company car driver or fleet operator. Some of the rules for the tax year 2002/2003 were released in advance, giving people time to make informed decisions. The only change of any significance is the way the fuel scale charge will work in the future.

Fuel scale charge

In his 1998 Budget, the Chancellor announced that scale charges for fuel provided for private motoring in company cars would be increased by 20% in each of the five years from 1998/99 to 2002/03. For 2002/03, the Chancellor has continued with a net increase of only 16% which is less than 20% due to the decrease in the cost of fuel.

From 2003/2004 the fuel scale charge will be linked directly to the percentage used to calculate the company car tax charge under the CO₂ emissions regime. Employees will be able to pro-rate the fuel scale charge if they opt out of free fuel part way through the tax year. However, they will suffer the full charge if they opt back into free fuel later in the same tax year.

For more detail see our article Is free fuel expensive?

Link to our Driver Fuel Adviser or our Company Fuel Adviser to see whether you should still take free fuel.

Capital allowances

Cars that are registered after 17 April 2002, and either emit not more than 120g/km CO₂ or are electronically propelled, now qualify for 100% first year allowances.

Expenditure incurred on plant and machinery for the re-fuelling of vehicles powered by natural gas or hydrogen qualifies for 100% first year allowances. Categories of expenditure include storage tanks, compressors, pumps, controls, gas connections and filling equipment.

Vehicle excise duty

Vehicle excise duty (VED) for cars first registered from March 2001 is based on the car's carbon dioxide emissions and fuel type. This has offered motorists the opportunity to reduce their VED bills by choosing less polluting cars. To increase incentives to use cleaner cars, the 2002 Budget froze VED rates for cars and introduced a new low-carbon band offering a £30 reduction for cars that produce CO₂ emissions not exceeding 120 g/km.

Road fuel gases

Road fuel gases have important reductions in particulates and nitrogen oxide emissions compared with conventional fuels. To encourage individuals and companies to make greater use of them, the 2001 Budget reduced the duty on road fuel gases to 9 pence per kilogramme and announced that the duty would not be increased in real terms until 2004 at the earliest.

Company vans

The Government will review the tax treatment of the private use of vans provided by employers taking into account environmental benefits, fairness and modern working practices. The 2002 Budget also reduced VED to £105 for vans meeting the Euro 4 emissions standard from March 2003.

VAT fuel scale charge

Due to the fall in the price of fuel, the VAT fuel scale charges for 2002/2003 have decreased, and are as follows:

Source: Deloitte & Touche