WITH the announcement that all petrol and diesel car sales will end by 2040, it raises the prospect of how the government will replace its current fuel duty tax take.
As the automotive world moves to an electric only future, it will leave a large hole in the government’s finances: a £27 billion sized hole to be precise (source RAC Foundation).
- End of road for petrol and diesel cars and vans, read this story here
It raises the prospect that the electric charging infrastructure that will replace it will offer electricity but with a tax on top believes Mark Cunningham, a manager at Blick Rothenberg, an accounting and tax advisory firm.
What goes into the cost of a litre of fuel?
Currently a litre of fuel costing £1.30 is comprised approximately of:
- Base cost 50p
- Fuel Duty 58p
- VAT 22p
He believes that the government faces a tough choice between balancing the requirement for greener transport and maintaining tax revenues.
Mark Cunningham said: “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.”
Mark added: “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.
The road to carbon-geddon, click here to read
“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.”
Alan Pearce, VAT Partner at the firm, added: “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.”