HMRC updates tax rules and calculations on ultra-low emission vehicles

HM Revenue & Customs (HMRC) has released new guidance that brings changes to the company car benefit calculations, as the Government looks to encourage greater use of ultra-low emission vehicles (ULEV).

Under the new rules, if a ULEV has a CO2 emission figure of 1-50g/km, businesses will now need to provide the car’s zero-emission mileage, which covers the distance that the car can travel in miles on a single electric charge.

While there will be no change to the way company car tax data is reported, companies may need to provide additional information on the P11D.

To meet this new requirement for ULEVs, from 6 April 2021 a new zero-emission mileage field will be shown on the P11D form (both online and offline), which will require a business to provide this new information.

Where a company owns the vehicle, the zero-emission mileage figure can be found on the vehicle’s Certificate of Conformity (CoC), which may display this figure as the ‘electric range’. This may also be referred to as combined or equivalent AER (All-Electric Range).

Where the zero-emission mileage figure is displayed on the CoC in kilometres, it must be converted into miles and rounded up to the nearest mile.

Businesses that are leasing a vehicle(s), should request and obtain this new data in the same way they currently receive information for company car tax reporting. Where a fleet or car leasing company cannot provide this information, businesses can often obtain the zero-emission mileage figure from the car’s manufacturer.

This follows additional changes to banding for ultra-low emission vehicles (ULEVs), which has seen the introduction of 11 new ULEV bands and a separate zero-emissions band.

These latest changes are part of plans to move the calculation of company car tax and vehicle exercise duty over to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), instead of the New European Driving Cycle (NEDC).

Following this changeover, new cars first registered from 6 April 2020 will use CO2 emission figures based on WLTP, while cars registered before 6 April 2020 will use CO2 emission figures based on NEDC.

To take this additional change into consideration, from 6 April 2021 it will be mandatory to provide the date a car is first registered on the P11D form as well, via a field on the new online and offline forms.

Failure to obtain this data and report it accurately on the P11D form could lead to incorrect company car benefit in kind being calculated.

Link: Tax authority clarifies car tax rules for ultra-low emission vehicles