Taxable benefits and vehicle excise duty: regime for measuring carbon dioxide emissions
Published 22 November 2017
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Who is likely to be affected
This measure affects all motorists and employers who provide company cars, although this will not result in any changes to any individual’s vehicle excise duty (VED) or taxes related to the company car tax regime (CCT). This measure also doesn’t apply to any vehicles other than cars.
General description of the measure
This measure confirms that for VED and CCT purposes, the applicable carbon dioxide emissions figure for cars will continue to be based on the current New European Driving Cycle (NEDC) test procedure.
Policy objective
This measure provides assurance and certainty for motorists, employers, car manufacturers, HM Revenue and Customs (HMRC) and Driver and Vehicle Licensing Agency (DVLA) that the correct emissions data is being used for the purpose of collection of VED and CCT related taxes.
Background to the measure
The VED and CCT systems are based on carbon dioxide emissions figures from the current NEDC test procedure.
From 1 September 2017 a new test procedure was introduced (Worldwide harmonised Light-vehicles Test Procedures (WLTP)). Existing EU legislation requires car manufacturers to report their results under this new test cycle from autumn 2017, as well as providing figures that relate to the current NEDC test cycle.
The current UK legislation does not clarify which figure should be used for VED and CCT purposes where there is more than one emissions figure recorded. This measure ensures that the DVLA and HMRC can continue to use NEDC data as the basis of setting and collecting VED and CCT related taxes.
At Autumn Budget 2017, the government announced that it would legislate, in a future Finance Bill, for the WLTP system to be introduced from April 2020. Following engagement with the car industry, the government considers that this timeline for introducing the new system will give car manufacturers time to reflect the new values in all of their products, and to explain to their customers what the change would mean for them.
Detailed proposal
Operative date
For the VED system this measure will have effect for cars first registered from 1 September 2017. For the CCT systems, this measure will take effect from the beginning of the tax year 2017 to 2018.
Current law
References to specifying a carbon dioxide emissions figure are included in Schedules 1 and 2 of the Vehicle Excise and Registration Act 1994 (VERA) and in sections 136, 137 and 171 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). The legislation does not specify which emissions figure should be used where more than one emissions figure is recorded.
Proposed revisions
Legislation will be introduced in Finance Bill 2017-18 to confirm that VED and the CCT bands will continue to be based on the carbon dioxide emissions figures that are compatible with the current NEDC test. WLTP test procedure values should be ignored.
The changes introduced by this measure also ensure that UK Primary Legislation refers to the correct version of the ‘EU certificate of conformity’.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
There is no anticipated cost to individuals or households.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
There is no equalities impact from this measure.
Impact on business including civil society organisations
This measure will provide assurance to automotive manufacturers that they are providing the correct emissions data. As this measure only clarifies that the existing system for carbon dioxide emissions will continue to be used, there is no impact on businesses or civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
This measure will not have any operational impact to DVLA or HMRC who collect VED and CCT respectively. DVLA and HMRC will continue to use carbon dioxide figures compatible with the current NEDC test in the collection of VED and CCT related taxes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please email: employmentincome.policy@hmrc.gsi.gov.uk.