Guarded welcome to WLTP review gives fleets some breathing space

There was a guarded welcome to the news in last month’s Budget Statement of a review into the impact of the new Worldwide harmonised Light vehicle Test Procedure (WLTP) on both company car tax and Vehicle Excise Duty (VED).

However, it does give fleet operators some breathing space before the 2019/2020 tax year when any changes brought about by the review are likely to be introduced.

In the Budget on October 29, the government announced that it will review the impact of WLTP on company car tax and VED, prior to reporting in the Spring Statement in March.

Any changes resulting from the process will then presumably be ushered in immediately to address any potential tax rises brought about by the new emissions standard.

The WLTP regime, the government said, aims to provide a closer representation of ‘real-world’ fuel consumption and CO2 emissions. Vehicle manufacturers are currently able to quote WLTP emissions values correlated to the previous New European Driving Cycle (NEDC) testing system, before they must switch solely to WLTP values from April 2020.

However, many experts have identified a general increase in CO2 emissions under the NEDC-correlated WLTP values when comparing the old regime to the new, which, in the absence of remedial action by the government, could increase BIK tax bills along with charges for VED.

BVRLA calls for new tax bands

Immediately after the Budget, news of the review was welcomed by the British Vehicle Rental and Leasing Association (BVRLA) which urged the Government to publish a new set of tax bands as soon as possible to remove uncertainty in the fleet market.

Chief Executive Gerry Keaney said: “It is great to hear that the Treasury is making plans to remedy any potential tax distortion caused by the transition to the new WLTP emissions standard in April 2020.

“However, it is vital that fleets and company car drivers are able to plan for the future, confident that they are working with more accurate emissions information and a fairer tax regime that rewards those who choose cleaner vehicles. These revised tax bandings can’t come too soon.”

Fleet Alliance managing director, Martin Brown, said that “we are entering a period of company car tax uncertainty for the next five months.”

“As it stands, company car drivers who renew their vehicles now are doing so without knowing the tax consequences of the WLTP review and the impact on the tax regime beyond 2021.

“While we welcome the review process itself, as it gives the government the chance to iron out any potential tax anomalies brought about by the new system, the uncertainty that is created in the interim will make it difficult for drivers and fleet managers to make any meaningful decisions over suitable replacement vehicles.“

Companies should adopt blended approach to fleet mix

Brown said that during this period fleet operators should work closely with their fleet providers to identify and select the most suitable vehicles in line with their fleet policies, taking into account known factors.

“This could include a mix of diesel, petrol, hybrids and pure electric vehicles depending on the fleet need, and based on factors we do know – such as the new lower tax charges for ultra low emission vehicles which come into force in April 2020, based on their electric range,“ he said.

Brown said that it was disappointing that the Government had not seen fit to bring forward the tax regime for ULEVs to next April. Under its current plans, the Benefit-in-Kind (BIK) rate for electric company cars is set to rise to 16% then, before dropping to 2% in April 2020.

This has served to actively disincentivise sales of EVs, contrary to the Government’s own ambition to encourage their take-up, as set out in its ‘Road to Zero’ environmental strategy.

But by bringing forward the 2% BIK rate for zero emission vehicles, the Government could have provided a much-needed stimulus to the EV market, said Martin Brown.

“Our plea to the Chancellor to introduce the new BIK rates for EVs from this coming April obviously fell on deaf ears, while the strange decision to scrap plug-in-car grants for plug-in hybrid electric vehicles will also create a drag on demand,” he said.