Uncertainty Over Company Car Tax Increases

In the Autumn Budget 2017, it was announced that cars registered from April 2020 would be taxed based on the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP), while those registered before April 2020 would retain their current tax treatment related to figures from the outgoing NEDC test.

Unfortunately, the new tax bands relating to the WLTP are still yet to be published, and that is causing considerable uncertainty for businesses and fleet managers who are unable to plan ahead.

What is causing the uncertainty over future company car tax?

The more rigorous WLTP will take into account real-driving data rather than theoretical scenarios as before. That will make the test more accurate and potentially lead to higher CO2 emissions and fuel consumption figures.

Currently, company car tax tables published in 2016 are known up until 2020/21. That gave fleets advance notice of their liabilities for the next four years, which allowed them to make informed decisions about the vehicles they chose to buy.

The new banding system, which is due to come into effect in 2020/21, was expected to be announced in the Spring Budget. However, that was pushed back indefinitely. That means businesses now have just two years of advance information before the company car tax bands change entirely. That is taking its toll on the company car market and impacting the ability of businesses and fleet managers to make purchasing decisions.

How are businesses being affected?

Businesses and the fleet industry have become increasingly frustrated with the Government’s handling of the new emissions tests and its failure to make clear the impact it will have on company car tax and Vehicle Excise Duty.

A recent survey found that 94.5 percent of fleet managers felt the delay in publishing the new tax bands was having a negative long-term impact on the industry. In real terms, this has left some businesses and fleet managers relying on long-term hire vehicles while they wait for the WLTP bands to be published.

Without having certainty of their tax liability in years three and four of ownership, many businesses are reluctant to make a purchasing decision. In some cases, that has seen all vehicle orders being put on hold until the future company car tax tables are available.

What has the government’s response been?

HMRC launched a consultation late last year in an attempt to better understand the problem, and that closed on 17 February this year. Unfortunately, the government did not respond to the submissions during the Spring Statement. Instead, the Chancellor said in a written statement that a response would be issued ‘in the coming months’.

It’s thought the cause of the delay is down to the protracted Brexit negotiations. Whatever the reason, the inability of businesses and motorists to plan for the years ahead is proving to be particularly damaging during times of such widespread economic uncertainty.

Find out more about the Worldwide Light Vehicle Test Procedure (WLTP); the new emissions test that’s bringing about the company car tax changes.