Policy paper

Technical amendments regarding vehicle emission certification

Published 27 October 2021

Who is likely to be affected

People using vehicles registered through the Great Britain (GB) vehicle type approval scheme, and businesses purchasing or hiring cars.

General description of the measure

This provides for official documentation which certifies the level of a vehicle’s carbon dioxide (CO2) emissions for the purposes of capital allowances, Company Car Tax (CCT), and Vehicle Excise Duty (VED). This is represented by a European Union (EU) certificate of conformity, or a UK approval certificate.

This measure will update the official vehicle approval documentation recognised for determining the level of a vehicle’s CO2 emissions for the purposes of capital allowances, CCT, and VED, which will include new certificates of conformity that will be introduced through the new GB vehicle type approval scheme.

For the purpose of capital allowances, this measure will also ensure that the applicable CO2 emission figure from the official documentation will be that certified under the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

Policy objective

This measure will make technical amendments to capital allowances, CCT and VED legislation so that the tax system continues to function as intended where vehicles have been certified through the new comprehensive vehicle type approval scheme due to be introduced.

For the purpose of capital allowances, this measure will also ensure that any figure representing the level of a vehicle’s CO2 emissions is disregarded unless it has arisen from WLTP.

Background to the measure

A vehicle manufacturer is able to apply for approval for a vehicle for use on the road in respect of a type of vehicle, a ‘type approval’, rather than a specific single, or small number of vehicles. Where a type approval for a vehicle has been obtained, the manufacturer can then certify that vehicles manufactured for that type of vehicle conform with the specifications for which the approval has been obtained.

An approval for a type of vehicle had been automatically recognised where a manufacturer had obtained a type approval within the EU, and from this could issue an EU certificate of conformity for each vehicle manufactured under that approval. However, since the end of the transition period on 31 December 2020, following the UK’s withdrawal from the EU, European type approvals have no longer been automatically recognised for vehicles for use on roads in GB. Since 1 January 2021, a provisional GB type approval scheme has been in operation and manufacturers with an EU type approval have been required to apply for a provisional GB type approval, which is valid for a maximum period of two years. During 2022 the provisional GB type approval scheme will be replaced with a new comprehensive GB type approval scheme, which will introduce the new certificates of conformity.

The WLTP was introduced to replace the test procedure known as the New European Driving Cycle, for establishing the official fuel consumption and CO2 emission levels of new cars. Data obtained through the WLTP is intended to provide a more accurate representation of fuel consumption and level of CO2 emissions.

Detailed proposal

Operative date

For capital allowances, the measure will have effect from the 2017 to 2018 tax year (in relation to income tax and Capital Gains Tax) or for accounting periods ending on or after 4 November 2017 (in relation to Corporation Tax). For CCT, the measure will have effect for cars first registered on or after implementation period (IP) completion day (from 31 December 2020), or from the 2017 to 2018 tax year for cars registered after 1 January 1998 with a UK approval certificate.

For VED, the measure will have effect for licences taken out on or after 3 November 2021.

Current law

For capital allowances, section 268C Capital Allowances Act 2001 provides for determining the level of a vehicle’s CO2 emissions for plant and machinery allowances in part 2 of that Act, by reference to an EC (EU) certificate of conformity, or a UK approval certificate.

For taxable benefits arising from the provision of cars (i.e. CCT), section 133 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) provides for determining the appropriate percentage for a car for a tax year in order to calculate the amount of tax due. Chapter 6 of Part 3 contains the rules on whether or not the appropriate percentage should be calculated by reference to the car’s CO2 emissions figure, which, for current registrations, is by reference to an EC (EU) certificate of conformity or a UK approval certificate. Section 171 of ITEPA contains various minor definitions applicable to Chapter 6 of Part 3 of ITEPA, including the definition of a UK approval certificate.

For VED, Schedule 1 to Vehicle Excise and Registration Act 1994 provides for determining the level of a vehicle’s CO2 emissions for the annual rates of duty for certain vehicles, by reference to an EC/EU certificate of conformity, or a UK approval certificate.

Proposed revisions

Section 268C of the Capital Allowances Act 2001 will be amended to update the official vehicle approval documentation recognised for determining the level of a vehicle’s CO2 emissions, which will include the new certificates of conformity. An amendment will also be made to treat the applicable emissions figure as that arising from the WLTP.

Various revisions will be made to Part 3 Chapter 6 of ITEPA 2003 to update the official vehicle approval documentation recognised for determining the level of a vehicle’s CO2 emissions, which will include the new certificates of conformity, and to amend the definition of a UK approval certificate.

Schedule 1 to Vehicle Excise and Registration Act 1994 will be amended to update the official vehicle approval documentation recognised for determining the level of a vehicle’s CO2 emissions, which will include the new certificates of conformity alongside existing references to EU or EC certificates of conformity.

Summary of impacts

Exchequer impact (£m)

2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027
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.

The terms used in this section are defined in line with the Office for Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth. You can request further details regarding this measure at the email address listed below.

Impact on individuals, households and families

This measure is not expected to have an impact on individuals because the change to this legislation will be in accordance with official approval of motor vehicles for use on roads within the UK, and does not require businesses or civil society organisations to do anything differently compared to what they do now. This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not expected that there will be impacts on any groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is not expected to have an impact on businesses or civil society organisations because the change to this legislation will be in accordance with official approval of motor vehicles for use on roads within the UK, and does not require businesses or civil society organisations to do anything differently compared to what they do now.

Operational impact (£m) (HMRC or other)

It is estimated that no HMRC operational costs will arise to deliver this measure, on the basis that it represents a change to legislation only.

Other impacts

Other impacts have been considered and none has been identified.

Monitoring and evaluation

This measure will be monitored through information collected through tax returns, new vehicle registrations provided by the Department for Transport / Driver and Vehicle Licensing Agency and through communications with the affected taxpayer population.

Further advice

If you have any questions about this change, please contact HMRC on email contact.capitalallowances@hmrc.gov.uk.