Frightening Increases in CO2 Emissions Following WLTP Findings Will Cause Changes To Car Choices.
Thursday, 27. February 2020
I mentioned last week that as of the 1st April 2020 the new WLTP emissions ratings come into force. This will affect drivers’ benefit in kind tax if you drive a company car but it could also affect the 1st year road fund licence costs which could also increase the rental costs as this is part of the ‘on the road’ cost of the car. So if you’ve been quoted on a car that will be delivered after 1st April you could be paying a little more per month.
Some company cars could disappear from choice lists as new emissions test results put them beyond CO2 thresholds used by fleets.
Data published by manufacturers show some vehicles that were below 130g/km or 110g/km, using the NEDC-correlated CO2 figure, now fall outside those key benchmarks, thanks to the tougher testing regime.
The new CO2 values, derived from the Worldwide harmonised Light vehicle Test Procedure (WLTP), will be used for tax purposes for all new cars registered from April.
However, as manufacturers begin to publish the data, fleets are finding that the new test has seen CO2 values for some cars increase.
For example, the BMW 520d M Sport originally had a NEDC-correlated CO2 figure of 108g/km, but under WLTP it has risen to 131g/km.
It’s a similar story for the Volvo XC40 D3 R Design, which will increase from 127g/km to 144g/km, and the Volkswagen Tiguan 2.0 TDI SE L, which will rise from 122g/km to 156g/km.
“We’re seeing a lot of vehicles breaching the 110g/km and even the 130g/km cap,” said David Bushnell, principal consultant at Alphabet GB.
It means some familiar models on today’s choice lists will have to be replaced by more tax-efficient, hybrid or fully electric versions.
Bushnell says the impact of WLTP on fleets will be comparable to the “re-set” of company car policies in 2002, when taxation moved from mileage to CO2.
Emissions caps for vehicles used by some fleets have followed the downward trajectory of the threshold for capital allowances and lease rental restrictions.
The main threshold for capital allowances and lease rental restrictions was reduced from 130g/km to 110g/km in 2018, after originally being cut from 160g/km in 2013.
Under capital allowance rules, cars bought by companies that emit up to 50g/km are eligible for 100% write-down in the first year; for those emitting 51-110g/km, it’s 18% a year; and for more than 110g/km it is 6% a year.
Under the lease rental restriction, new cars with emissions of 110g/km or less are eligible for 100% of their lease payments to be offset against corporation tax. For those with emissions of 111g/km or more, only 85% is claimable.
The Government refused to consider the impact of WLTP on capital allowances and the lease rental restriction when last year it launched a consultation on what it should do to mitigate its effect on company car tax and vehicle excise duty (VED).
Bushnell called for their inclusion at the time but says Treasury “weren’t prepared to talk about the (110g/km) derogation and now we’re seeing a lot of vehicles impacted”.
Fleets have used the CO2 thresholds to benchmark their emissions cap to ensure they are as tax efficient as possible.
Nick Hardy, sales and marketing director at Ogilvie Fleet, says 130g/km became the norm for many companies, with an increasing number choosing the lower 110g/km cap.
Faced with some cars potentially falling outside company car policies, because of an increase in CO2, he urged fleets not to be tempted to increase their cap to simply maintain vehicle choice.
He explained: “It’s not the right thing to do; it completely defeats what we’re all trying to achieve.”
However, in the short term, while WLTP CO2 data is still missing on many models (see page 4), Bushnell thinks fleets could consider a temporary removal of CO2 caps.
He said: “It’s not exactly palatable, but the issue is we could be delivering a car that we perceive is below the cap, but then by the time it’s configured and registered, it’s actually over the cap.”
Not only are large swathes of CO2 data missing for base models, but the impact of vehicle options on the final figure is also an issue for fleets.
Bushnell urged fleet operators to allow wholelife costs to guide vehicle choice.
Wholelife costs take account of several factors, including fuel, employer Class 1A National Insurance Contributions, service, maintenance and repair, and insurance, as well as any cash allowances paid to employees.
Bushnell said: “You’ve got to be looking at your choice list on a wholelife cost basis, but there are still a lot of businesses that don’t.”
PricewaterhouseCoopers (PwC) has previously reported that just 32% of employers offering company cars use wholelife costs to determine the vehicles available.
