Real World Emissions Tests Are Confusing Employers & Employees
Friday, 20. April 2018
The new emissions tests were supposed to stop any emissions test fiddling and allow employers to make a more educated assessment when deciding on their car policy – even when the car policy only extended to one car. As a result, we all knew that there was a very high probability that the emissions figures, for both CO2 and NOx would both increase which would affect employees benefit in kind tax, vehicle excise duty and NI.
And that is pretty much the sum total of all the information provided by the Government. As over 60% of my cars are supplied on business agreements I thought I would explain where we are at the moment. The current testing procedure is called NEDC and it’s the result of those tests that we use to calculate benefit in kind tax.
Since September 2017 all new cars launched or facelifted have to be tested under the new regime, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). The other thing we know is that all new cars must be tested under WLTP from 1st September 2018 (unless the car is on runout) but given an NEDC correlated figure.
This figure was assumed to mean that if your car had emissions of 95g/km of CO2 under NEDC and 120 g/km under WLTP a calculation would be made and we would end up somewhere close to the NEDC reading. Unfortunately, that’s it – all the information we have. So we have yet to learn how the changes will affect benefit in kind tax, vehicle excise duty and National Insurance.
From what I have been reading everything else, other then the two known deadlines, is total guesswork. We haven’t even been told that if the car you are driving is tested and the calculation applied to arrive at a CO2 emissions midpoint, whether you will pay increased benefit in kind tax and NI. The assumption is that if you already have the car you will continue to pay at the old NEDC emissions level. But we don’t know. Apparently, the Treasury is still ‘assessing the impact’.
Another assumption is that given company vehicle lifecycles it is assumed that until 2020, any cars taken by businesses and provided as company cars will attract BIK tax and NI based on the WLTP test results then run through the calculator, known as CO2MPAS, to arrive at the mid-point figure. Assuming also that after 2020 the full WLTP reading will be used. Again, whilst it is the general feeling of the industry, 2020 has not been confirmed as the change date.
Whilst it was originally believed that once the CO2MPAS calculation was applied that the CO2 readings would only increase marginally, it has been found that they have increased by between 10 and 20 percent, hitting company car drivers pretty hard as the readings bump them up the tax bands. This could lead to a number of employees switching from company cars to car allowances which is not good. Experience shows that employees don’t take such good care of their cars and they err towards used cars as opposed to new cars.
I have to say that I was a remainer, not a remoaner. I knew that the BREXIT decision could go either way and I was prepared to accept the decision – whatever the outcome. But if this is an example of how we take back control, we are in for a very rough ride! By Graham Hill
