Blogs/Vlogs

Brexit – taxes and the Worldwide Harmonised Light Vehicle Test Procedure

12 April 2018

The Department of Transport consultation on using the CO2 Emissions data from the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) from 6 April 2020 onwards, closed last month. The consultation document confirmed that from 6 April 2020 the WLTP numbers will be used to calculate both the First Year Vehicle Excise Duty and also the Company Car Benefit in Kind taxation.

EU Legislation has driven the move to WLTP from the current New European Driving Cycle (NEDC) testing that was introduced in the 1980s. The EU guidance is clear that...”WLTP will result in a higher g/km CO2 value for a specific vehicle compared to NEDC – simply because it is more rigorous than the old test”.

To cover off any adverse taxation implications of the change on its citizens - the EU has a policy recommendation that...”WLTP should not negatively impact vehicle taxation by increasing costs for consumers”.

That would appear a reasonable safeguard against any tax increases being introduced  with the change – except that we UK consumers will not be EU Citizens after 29 March 2019.

The implementation after the consultation results are known will be an interesting benchmark as to the Governments Brexit approach. Does it recalibrate the relevant tables at 6 April 2020 (so that the same car is treated consistently year on year) or does it allow individual cars to float around the CO2 duty and taxation bandings dependent upon their new WLTP data?  This latter course of action will probably raise more revenue – but it will be a divergence from what is happening in the remainder of the EU.

Given the potential adverse changes in company car taxation (including those recently announced to 'salary sacrifice' and 'cash equivalent' schemes) – now is probably a good time to review your arrangements for providing vehicles to staff.

Please contact a member of the automotive team if you wish to explore the options available.

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