Spring Statement: WLTP consultation response to be published in “coming months”

The Spring Statement has failed to deliver any clarity for the fleet and leasing industry over future tax rates.

Both VED and company car tax were the subject of a review to assess the impact of the Worldwide harmonised Light vehicle Test Procedure (WLTP), which closed last month (fleetnews.co.uk, February 15).

However, as predicted by Fleet News, there was no response to the consultation in today’s statement from the Chancellor, Philip Hammond.

Instead, in papers accompanying the Spring Statement, the Government says that it will issue its response to the review into the impact of the WLTP on Vehicle Excise Duty and company car tax “in the coming months”.

The Government has previously indicated that new WLTP-based CO2 values will be adopted for tax purposes from April 2020.

It leaves a matter of months for the Government to act or leave fleet decision-makers and company car drivers facing a possible tax increase.

Initial evidence provided by manufacturers suggests more than 50% of cars will see an increase from NEDC-correlated figures to WLTP of between 10-20%. Fleets have already reported increases of up to 30% between NEDC and NEDC-correlated figures, currently used for tax purposes.

Ashley Barnett, head of consultancy at Lex Autolease, said: “The lack of long-term company car tax tables is holding the fleet market back. 

"Before fleet decision makers can build a strategy based around the average 48-month contract, and before employees can commit to what is essentially a four-year investment, they need assurance that the associated costs are not going to increase over its lifetime. 

“We already know that orders for diesel vehicles are being delayed in case further tax increases are announced that could make them prohibitively expensive. Similarly, questions remain over the future tax treatment of electric vehicles, which makes it difficult to forecast the cost of transitioning to an ultra-low and zero emission fleet.”

Claire Evans, head of fleet consultancy at Zenith added: “We back the BVRLA’s position in calling on the government to demonstrate its support for businesses by adjusting future VED and company car tax bands for 2020 and beyond to account for the increase in WLTP-based CO₂ figures.

“The fleet sector has a key role to play in both buying new ultra-low emission vehicles and then reselling them into the used market. By ensuring that all CO₂-related taxes and charges are treated consistently under WLTP the industry has a platform to build on in securing the road to zero.”

Matthew Walters, head of consultancy at LeasePlan UK, believes that the Chancellor, and the Government, have been distracted by Brexit.

He continued: "Fleets and drivers need confirmation of how the WLTP regime will be dealt with in regards to vehicle and company car taxation as well as capital allowances. 

"We urge Hammond to stick to the commitment he has set out today even though over the coming months is a little vague." 

The Government says it will also publish the ‘Future of Mobility: Urban Strategy’ in the coming months. It aims to set out the Government's approach to putting the UK at the forefront of mobility, and responding to the significant changes taking place in transport technology, such as the growth in electric vehicles, the development of self-driving vehicles and advances in data and internet connectivity.

There will also be an operational review of the Insurance Premium Tax operational - a call for evidence on where improvements can be made to ensure that it operates fairly and efficiently.

The Chancellor gave further details about his Transforming Cities Fund – £60 million of investment in 10 cities across England - announced at Budget 2017.

This will fund 30 new schemes such as bus station upgrades, new cycle lanes and road improvements, supporting the wider programmes being delivered by city regions as part of the Industrial Strategy, he said.

The 10 cities were selected for the competitive fund in September 2018, and are as follows: Derby and Nottingham £7.2 million; Southampton £5.7m; Leicester £7.8m; North East £10m; Portsmouth £4m; Norwich £6.1m; Sheffield City Region £4.2m; Plymouth £7.6m; West Yorkshire £2.2m; and Stoke-on-Trent £5.6m.

The Chancellor also confirmed that the Government will hold a Spending Review before the summer recess. This will set departmental budgets, including three-year budgets, if an EU exit deal is agreed. 

He pledged to spend a £26.6 billion Brexit war chest to boost the economy if MPs vote to leave the European Union with a deal.

He stressed the "deal dividend" was based on a smooth Brexit, while a disorderly Brexit would deal a "significant" blow to economic activity in the short term.

The latest figures from the Office for Budget Responsibility (OBR) cut its 2019 growth forecast to 1.2% from the 1.6% expansion predicted by the government's economic watchdog last October. After that growth is expected to rebound.

Meanwhile, the OBR said that the Government is expected to borrow £22.8bn this financial year to plug the gap between the money it spends on public services and the tax revenues it collects. This is almost £3bn lower than the £25.5bn predicted by the OBR in the October Budget.

The watchdog expects the improvement in the public finances to continue in future years, helped by stronger tax receipts and lower spending on debt interest.

Mark Sinclair, financial director of TMC, said: "While the Chancellor talked today of the need to provide the country with 'genuine and sustainable choices' about its future, fleets and drivers are still denied vital information on future company car tax rates, which they need to make sustainable vehicle choices.

"If Mr Hammond really wants to banish what he called the spectre of uncertainty, which is paralysing the company car industry, he must ensure the response to the WLTP consultation is published within weeks, not months, together with BIK rates for the next 3-4 years."

Paul Hollick, chairman of the ICFM, was "hugely disappointed" with the lack of clarity. “Promising to publish details ‘in the coming months’ on what is a fundamental issue for all fleets merely continues the uncertainty that is crippling decision-making," he said.

“It is clear that the Chancellor, ministers and HM Treasury, has become completely blindsided by Brexit and seem incapable of making decisions on many issues, including future company car benefit-in-kind tax rates.

“In terms of overall taxation, company car benefit-in-kind tax may only be a relatively small issue. However, almost one million employees pay benefit-in-kind tax on company cars, according to HM Revenue and Customs’ figures, and sales of cars to fleets are critical for motor manufacturers.

“The fleet industry, indeed the entire motor industry, cannot afford for the Government to continue to drag its feet on an issue - WLTP-based taxation - the introduction of which it has known about for years and should have been planning for.

“The Government continues to preach about requirements to improve air quality and reduce transport emissions, and fleet decision-makers acknowledge that businesses have a crucial role to play in decarbonising.

“However, all the good work that fleets have done in recent years in that area is unravelling because the Government cannot tell the industry what company car benefit-in-kind tax rates based on WLTP-produced emission figures will be from April 2020.

“Government in-decision is delaying the acquisition by fleets of new cars featuring the very latest emission-busting engine technology and, in some cases, driving employees out of company cars and into privately-funded older and more polluting vehicles.”

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