Introduction of new CO2 testing could leave fleets picking up the tab
It looks likely that fleets could end up with increased tax bills next year when the Worldwide Harmonized Light Vehicles Test Procedure (WLTP) comes in to force in September, replacing the current New European Driving Cycle (NEDC) test. The new checks tend to produce higher CO2 scores, with some vehicles posting figures as much as 10% higher, results that would push company cars in to higher tax bands.
Phil Stones carries out the current tests at vehicle testing facility Millbrook Proving Ground, and warned "There's going to be a time where you'll have two vehicles - let's say a Ford Focus and an identical Ford Focus - that are a model year apart, that could have completely different CO2 and fuel consumption figures just because they've been approved over different drive cycles.
"In terms of fuel consumption and what the end-user gets, it will make no difference, but if a vehicle is tested over a harsher cycle and gets a harsher CO2, that's what it'll be declared with, so the exact same vehicle will, by default, fall into a higher tax band."
"We're seeing some vehicles where it doesn't make any difference at all and others where it makes a 10% difference."
The rates are yet to be confirmed, but a 10% increase on a vehicle with emissions of 99g/km would take the score up to 109g/km, meaning a price hike of two benefit-in-kind bands from 21% to 23% using HMRC's 2017/2018 rates.
It’s not clear at this stage if the government will change rates to take in to account these across-the-board increases or use the new testing regime as an excuse to raise more revenue. However, it has been suggested that the government could use the transition as a cash cow if it leaves the current taxation system in place after the WLTP has been introduced.
Nick Molden, an expert in vehicle emissions and CEO at Emissions Analytics confirmed the need for clarity: "Will the Government adjust the tax structure to be revenue-neutral or will they use this as an excuse to get more revenue?”
“If they don't change the bandings and CO2 numbers go up then everyone will automatically have to pay more. That would be very politically controversial, but they might do it."
With many questions remaining unanswered at this stage, Cap HPI have launched a team which will aim to help manufacturers, dealers and leasing companies through the changes.
Matt Freeman, managing consultant at Cap HPI, confirmed: “The new testing regime has wide-ranging impacts across the supply chain. To help customers manage the transition and understand outcomes, we have brought together a team of experts that will model the process and likely effects through the vehicle lifecycle.
“Cap HPI is well positioned to lead on the issue thanks to its extensive customer base and industry-leading new vehicle data. We will be able to deliver the data the industry needs in a wide range of future proofed formats and support the industry through the process.”
The WLTP will only apply to new vehicles initially, although other models will be subject to the new test from September 2018, and optional equipment will also impact a vehicle's rating.
How do you think these new rules will affect your fleet? Let us know what you think about the upcoming testing cycle.