Fleet - Tax changes - Seen to be Clean.

(From Financial Director)

Byline: John Maslen, editor, Fleet News.

Opting for a growing range of the cleanest, diesel-engined cars could minimise drivers' tax bills for years to come and ensure employers' National Insurance payments remain under control as well. The reason lies in rules set down when carbon dioxide became the key to cutting tax bills with the introduction of CO2-based company car tax in 2002.

Since then, company car drivers have paid tax on a percentage of the value of their vehicles, defined by the amount of CO2 their car produces.

The tax band starts at a minimum of 15% for 155 grammes of CO2 per kilometre and rises by 1% for every full 5g/km increase to the 35% maximum rate at 255g/km. However, when the system was launched, concern over particulate emissions from diesel engines persuaded the government to impose a 3% tax supplement on them. So, while a driver of a petrol car producing 155g/km pays tax on 15% of the car's P11D price, the diesel driver pays 18%, even though his vehicle has the same CO2 figure.

This provoked a storm of protest from the motor industry and, by way of a compromise, the government said the 3% supplement would be waved for diesel engines which met stringent standards, known as Euro IV, which all new diesel cars must meet by 2005.

At the time of the announcement, there were no vehicles that met the Euro IV benchmark, but drivers still turned to diesel engines in their droves, as their low carbon dioxide emissions cut tax bills, despite the 3% supplement.