MORE than 800,000 drivers of diesel company cars including the latest Euro 6 models will pay out £70 million extra in diesel company car tax in 2018-19 as a result of the 2017 Autumn Budget.
The Benefit in kind (BIK) surcharge on diesel company cars – but not diesel hybrids – rises from 3% to 4% next April unless they meet the Real Driving Emissions Step 2 standard (RDE2), a new standard to which all new car models must be subjected.
But in a classic political move, although Chancellor Philip Hammond moved to allay protest by saying it would not apply to cars meeting “the latest standard”, he did not admit that is a standard that does not yet exist!
RDE2 cannot be officially attained for another two years because although RDE1 was introduced in September 2017, Driving Emissions, stage 2, isn’t due until at least 2020.
That means that even if the cars meet the standard we won’t know because certification is not possible until 2020. The HMRC supporting paper saying it applied to “very few vehicles” initially was something of an understatement.
So the HMRC predictions that the higher company car tax income will fall from £70m in 2018/19 to £50m in 2019/20 would appear highly unlikely if the RDE2 standard is not available!
And so until 2020 at the earliest every new diesel and every driver of a new diesel will be charged extra tax in the revised Company car tax tables.
- For the business driver of a Ford Zetec 1.5 TDCi Zetec 95PS, P11D £20,640, the current monthly BIK tax bill of £72.25 will rise to £86 in April 2018 (£3.41 more than at 3% surcharge), £96.32 in April 2019.
Diesels meeting RDE2 will not be subjected to the diesel surcharge at all, likely to provoke a market impact with the potential benefit of saving thousands of pounds when the new models arrive on stream or with the accelerated shift to hybrids and electric cars.
New diesel cars without RDE2 will also be subject to raised Vehicle Excise Duty from April 2017 will bring in a further £125m in Chancellor Philip Hammond’s fiscal plan.
He dismissed the move as only affecting those diesels that did not meet the latest standards but did not says that those standards are the new RDA2 which the supporting HMRC paper conceded applied to “very few vehicles”.
This is rather than the publicly accepted Euro 6 used as an acceptable low emission guideline for London’s new T-Charge and proposed ULEZ on emissions.
Motor tax expert Nigel Morris of MHA McIntyre Hudson, who gave a Budget analysis to the Leasing Broker Federation Conference in London the day after the Budget, commented: “It was heavily rumoured that diesel cars would be targeted due to the bad publicity that they receive relating to air quality.
“It is disappointing that the introduction is only 5 months away and will impact existing vehicles, where drivers were unaware of this increased taxation when making their original choice”
The move was soundly criticised by BVRLA chief executive Gerry Keaney who said:
“Having previously promised that it was only looking to change the tax treatment for new diesel cars, the Government has gone back on its word by retrospectively raising the company car tax bill of hundreds of thousands of workers.
“People that chose a diesel car as a cost-efficient, low CO2 form of essential business travel are being punished unfairly. Why should drivers at work be treated differently from other taxpayers?
HMRC says in the Budget details: “The RDE2 standard sets a maximum permitted level of car NOx emissions in real world driving situations, and it is measured through portable emissions-measuring equipment in a variety of real driving trips.
“Cars must pass the certified level of NOx emissions irrespective of the driving behaviour during the test – for example, the level of emissions produced when an engine is under stress, say, by driving uphill.
“Manufacturers will certify NOx emissions. The certificate of conformity manufacturers produce will record which Euro-standard the vehicle is certified to.
“Diesel cars registered after 1 April 2018 and certified with a real-world NOx emissions figure greater than the RDE2 standard or without a certified NOx emissions figure will be subject to a supplement to the effect that these cars will go up by one VED band in their First-Year Rate.”
The impact will add £20 to first year VED of a Ford Focus, £400 to a Land Rover Discovery, HMRC said.
Gerry Kealey added: “We are also disappointed that the Government has not given any further clarity on Company Car Tax rates beyond the 2020 tax year. This information is vital as BVRLA members work with their customers in putting drivers into the most affordable, safest low-emission vehicles.”
On the temporary introduction of an increase in first-year vehicle excise duty for new diesel cars (for vehicles that don’t meet the Real Driving Emissions Step 2 standard), he said: “This is a fair, well-signposted tax change that will encourage more drivers and fleets to look at alternative hybrid and petrol-powered new cars.
“Fleets across the UK will be breathing a sigh of relief that the Chancellor has not increased the tax burden on commercial vehicle operators. This is the fair thing to do as they have no realistic alternative to using a diesel van or truck.
“We welcome the Government’s review into the fuel duty treatment of alternative fuels and the announcement of a freeze of the fuel duty escalator for LPG.”
On the confirmation that NEDC-compatible CO2 figures would continue to be used in calculating Company Car Tax until April 2020 Kealey said: “We welcome this final confirmation that a new WLTP-based CO2 Company Car Tax regime will be introduced in 2020.
“Although we had pushed for the vehicle leasing industry to be given an extra year to prepare for these changes, we look forward to working with the Government in developing a tax revenue neutral approach for 2021 and beyond.”
On the announcement of further support for Electric Vehicles, the BVRLA said: “Although manufacturers are bringing an ever-expanding range of AFV’s to market, the infrastructure is not in place yet to make it a mainstream choice. We welcome the Government’s commitment to investing in charging infrastructure and continued incentives, which will facilitate the wider uptake and use of electric vehicles.
“The fleet industry also welcomes the clarity provided on the company car fuel benefit exemption for people charging at work.”