HMRC Company Car Tax & Vehicle Excise Duty Consultation Launched
Company Car Tax & Vehicle Excise Duty Consultation Launched
The fleet industry is being asked to respond to a series of questions around whether vehicle tax changes are required once WLTP is adopted for tax purpoises from April 2020. Our Infographic below highlights the changes.
The New WLTP Testing Regime
The new WLTP regime was implemented in September 2018 with an interim measure known as NEDC correlated figure which is being used for Company Car Tax and VED purposes until April 2020 to smooth the transition into the new WLTP regime.
Fleets and Fleet Managers have felt increased costs already as the NEDC converted figures were higher than initially anticipated and this has an impact on Vehicle Excise Duty, Benefit in Kind and Emplyers National Insurance and HMRC says that this review will NOT consider the implications of using the EU’s computer simulation tool, known as CO2MPAS used to convert WLTP figures back to an equivalent NEDC figure.
The majority of the Government’s analysis has focussed on the differences between equivalent NEDC figures and WLTP, i.e. the change from Setpember 18 to April 2020 not prior to September 2018.
The Government believes that the fundamental structure of VED and company car tax is appropriate, including the diesel supplement and timeframe for introduction of future company car tax rates, something which many in the Fleet Insustry have questioned so wholesale changes are not the be expected.
Furthermore, while the Government has announced that new vans will be liable to pay VED based on CO2 emissions when first registered from April 2021, the WLTP impacts on vans will be considered separately.
HMRC Revenue Increases
Although the scale of the WLTP impact on HMRC finances remains unclear at the moment the Office for Budget Responsibility assumed an increase in HMRC revenue by adjusting the VED and company car tax forecasts from April 2020:
• VED receipts are forecast to increase by around £200 million a year on average from 2020-21.
• Company car tax receipts – through income tax and National Insurance contributions – are forecast to increase by £100 million in 2020-21, rising to £400 million in 2023-24.
If the Government makes changes to the vehicle tax system, however, it says it only wants to make a "simple" adjustment, such as a change in rates, because it says the fundamental structure of VED and company car tax is correct.
Both systems, says the consultation document, have provided a strong environmental signal to consumers and businesses, balancing the need raise revenue and support the uptake of cars with low CO2 emissions.
The consultation closes on by Sunday, February 17, 2019, with the Government expected to outline its response in the spring.
In the meantime Fleet Managers should continue to benchmark their Fleet Policy to ensure as the transition to WLTP takes places their policy is robust enough to absorb any significant vehicle tax changes and prepare for any regime changes post HMRC consultation.
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