Government confirms April 2020 tax switch to WLTP following consultation

The government has confirmed that it will change the system for measuring carbon dioxide (CO2) emissions to the Worldwide Harmonised Light Vehicle test Procedure (WLTP) for company car benefit-in-kind tax and Vehicle Excise Duty purposes from April 6, 2020 subject to consultation.

However, while the government, following its initial announcement in the Budget Statement (Buzz: December 2017), has confirmed that fleets have a two-year notice of the change-over date to WLTP for vehicle tax purposes, they still have no idea of the structure of either company car benefit-in-kind tax or Vehicle Excise Duty under the regime.

The government is also planning that all vehicle manufacturers change over to new WLTP fuel consumption figures in their promotional material and advertising for all vehicles on January 1, 2019.

The timeline change-over to WLTP from the current New European Driving Cycle system for measuring vehicles CO2 emissions and MPG is contained in a consultation document – ‘Road Vehicles: Improving Air Quality and Safety’ – published by the Department for Transport.

The structure of company car benefit-in-kind tax and Vehicle Excise Duty under WLTP is critical because industry experts have suggested that CO2 figures on a car-by-car basis could increase by about 20% in comparison with those produced under the outgoing NEDC regime.

Industry groups have called for a recalibration of both company car benefit-in-kind tax and Vehicle Excise Duty emission bands to ensure revenue neutrality and avoid any tax increases, which could be a further nail in the coffin of company car demand with employees opting to take cash.

However, whether CO2 emission thresholds will be recalibrated to take account of any increase remains to be seen. If tax thresholds remain unchanged – tax rates have already been announced to the end of the 2020/21 financial year – then the likelihood is that company car benefit-in-kind tax bills will rise significantly along with Vehicle Excise Duty rates.

The consultation also outlines that the government is looking at creating an offence relating to motor manufacturers supplying vehicles fitted with emission defeat devices following the recent Volkswagen ‘dieselgate’ scandal and, what it calls, “the strong imperative to improve air quality” as set out in the ‘UK Plan for Tackling Roadside Nitrogen Dioxide Concentrations’.

The consultation seeks views on new penalties for vehicle manufacturers supplying vehicles fitted with defeat devices, and proposals to implement various safety and environmental rules, including the latest European Union emissions standards for cars, vans and buses following the UK’s exit from the European Union.

On ‘dieselgate’ and other matters, the consultation document says: “The scandal has shown the need for stringent penalties for manufacturers fitting devices to circumvent the regulatory tests, to provide a sufficient deterrent in the future.

“Standards on vehicle engines – known as Euro Standards – which should have led to major reductions in emissions of nitrogen dioxide (NO2) from vehicles, have failed to deliver, particularly for diesel vehicles.

“The UK led the way in Europe in pushing for tough new type approval standards for cars and vans, including the ‘real world’ driving emissions tests that start to take effect from September this year, alongside tougher laboratory tests.

“Our proposals cover the introduction of these new standards, as well as the similarly stringent Euro6 standards for buses and new safety standards for HGVs, for vehicles built in low volumes.

“The tougher laboratory test should improve the accuracy of the fuel economy figures quoted by manufactures for comparison purposes and we are proposing that all car manufacturers shift to using the new testing results in publicity and labels from January 1, 2019.

“On June 23, 2016, the UK referendum on European Union membership took place and the people of the UK voted to leave the European Union. Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of membership remain in force. During this period the government will continue to negotiate, implement and apply European Union legislation. The outcome of these negotiations will determine what arrangements apply in relation to European Union legislation in future once the UK has left the European Union.”

On the creation of a new a new offence of supplying – to include registering or placing on the market – a vehicle using a defeat device, or other similar functionality, to deliberately circumvent type approval regulations, irrespective of which national authority is used to obtain type approval, the government’s intention is to make such an offence applicable to any, and all, elements of the supply chain – the manufacturer, importer or dealer/ distributor. However, the consumer would not be subject to penalty for purchasing such a vehicle or selling it as a second-hand vehicle.

The government plans to introduce legislation applicable to the new rules during April 2018 following the consultation, which runs until March 2. The consultation document is available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/678209/road-vehicles-improving-air-quality-and-safety.pdf

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