Clock ticking on urgent WLTP tax reforms
As Europe shifts over to the new WLTP fuel economy test cycle, Alex Grant looks at the urgent need for clarity on how tax bands will be reformed to recognise the associated rise in CO2 expected for most vehicles.
The NEDC is no longer
As of the 1st September, the New European Drive Cycle (NEDC) cannot be used to generate fuel consumption and CO2 figures for new cars. Its replacement is the World Harmonised Light Vehicles Test Procedure (WLTP), which is designed to better represent ‘real-world’ performance, and recognises the effects of optional equipment.
The EU predicts most vehicles will show higher consumption and emissions under the new regime, the latter potentially affecting tax bands. Although the first WLTP-tested vehicles likely to arrive early next year, there’s no indication of how taxation will accommodate those higher CO2 figures.
Or is it?
Physical NEDC testing has already stopped, but it’s not dead yet. Manufacturers are aiming for a 95g/km fleet-wide CO2 average by 2020, but that’s under the old regime. This means new vehicles will need to have NEDC data recorded in the interim, but it won’t come from a physical test. Instead, the WLTP values will be fed into a conversion tool, called CO2MPAS, which will generate the NEDC values. Both sets of data will be recorded during type approval.
A grey area
With two sets of data, it’s not clear yet when new vehicles will be taxed based on WLTP, because NEDC figures will still be available for the time being. The DVLA told us that NEDC will still be used on the V5C registration document until a new tax system is in place, and said it is speaking to stakeholders about a timetable. HM Treasury has no timeframe either, a spokesperson explaining that tax reforms were “inevitable” once the DVLA no longer had the relevant values.
Recommendations from Brussels
The EU has a timeframe in place. From 1st September 2018, all new vehicles (not just new vehicle types) will have to be WLTP-tested and type approvals under NEDC expire 12 months later. After that point, all new vehicles sold in Europe will be WLTP tested. Which means tax reforms must take place during the 2019/20 fiscal year, at the latest, to stop consumers being penalised.
It could happen sooner. The EU has published guidance suggesting that NEDC data shouldn’t be used in marketing material after 31st December 2018, and said it would be “preferable” for taxation changes to happen at the same time. One manufacturer told Fleet World that they are planning to follow that recommendation, hoping that clarity in this year’s Autumn Statement. If WLTP doesn’t accommodate WLTP in 2018/19, there’s a chance some vehicles could be sold with one CO2 figure, but taxed on another.
A Lack of Clarity
A clear picture of vehicle tax is needed, and fast. JATO Dynamics said tax rate changes could happen “anytime from September 2018” but that they are expected after January 2019, once the industry has found a usable correlation between the two data sets.
Meanwhile, data supplier, Carmen Data, said it will incorporate WLTP values into its tax calculators and configurators as they become available, though director Rupert Russell warned that tax changes may come sooner than some expect: “Although NEDC is likely to be on the Type Approval/Certificate of Conformity for petrol and diesel cars as well as WLTP figures, NEDC is technically only there to help with gathering data for fleet targets.
“There could be a massive mess if we see NEDC or equivalent figures on the V5 for cars which have been tested under WLTP, unless the legal basis and practical applications have been worked out first. And on the other hand, few are prepared to see WLTP figures appearing so soon.”