Tax authority clarifies car tax rules for ultra low emission vehicles

HMRC has updated the car and car fuel benefit calculations to support government’s campaign to improve air quality and reduce road pollution

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

If a car has a CO2 emission figure of 1-50g/km company car fleet managers will now need to provide the car’s zero emission mileage. This is the distance that the car can travel in miles on a single electric charge.

The banding changes are part of the move to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

In 2017, the government announced that it will replace the system for measuring car emissions for the purposes of calculating company car tax and vehicle exercise duty with the implementation of the new testing regime, the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). WLTP aims to be more representative of real-world driving conditions.  

New cars first registered from 6 April 2020 will use CO2 emission figures based on WLTP. Cars registered prior to 6 April 2020 will use CO2 emission figures based on the current testing regime, New European Driving Cycle (NEDC).  

The appropriate percentage bands for 2020/2021 can be found in the Employment Income Manual.

How this affects you

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

Completing section F on a P11D for the 2020 to 2021 tax year

From 6 April 2021 a new zero emission mileage field will be shown on the P11D form. If a car has a CO2 emission figure of 1-50g/km you will now need to provide the car’s zero emission mileage. This is the maximum distance in miles that the hybrid car can be driven in electric mode without recharging the battery. 

The online P11D will be updated with the changes. For paper P11D submissions you will need to ensure you complete the latest version as historic copies may not include the new zero emission mileage field. These will be available through your established method from 6 April 2021.

From 6 April 2021 it will be mandatory to provide the date a car is first registered. A new field will be available to enter this information.

If you are leasing the vehicle, you should obtain this new data item in the same way you currently receive your company car tax reporting data from the car leasing firm or fleet provider.

If, in extreme circumstances this information is not available, you can obtain the zero emission mileage figure via the car’s manufacturer.

If you own the vehicle, the zero emission mileage figure can be found on your vehicle’s Certificate of Conformity (CoC).

The zero emission mileage maybe displayed as ‘electric range’ on the CoC:

  • for hybrid cars registered before 6 April 2020 (NEDC) the ‘electric range’ within section 49.2 on the CoC should be used;
  • for hybrid cars registered from 6 April 2020 (WLTP) the ‘electric range (EAER)’ within section 49.5.2 on the CoC should be used.

This may also be referred to as combined or equivalent AER (EAER) combined.

If 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 before updating this field on the P11D.

Failure to obtain the data via the correct source could lead to incorrect company car benefit in kind being calculated.

Date first registered

The car’s date first registered can be obtained through the car leasing firm or fleet provider. The information is also available on the car’s logbook (V5C).

Car averaging

For car averaging purposes in tax year 2020 to 2021 onwards any notional CO2 between 1-50g/km will require a zero emission mileage figure. If this scenario applies, a default figure of 50 should be entered in the zero emission mileage field when submitting the company car details to HMRC.

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