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Good news for VW drivers: No backdated tax bills due to erroneous data

Author: Mark Thomas
Date: 23rd December 2015
Tags: TaxCompany Car Tax

You will remember that VW revealed that it had fitted around 11 million cars worldwide with a so-called defeat device, which tells the car’s computer how the engine is running and adjusts its performance to reduce emissions during official testing.

VW’s main objective was to cheat the American nitrous oxide (N2O) emissions test. It has therefore been suggested that this has no relevance to UK drivers because our vehicle excise duty, i.e. road tax, and company car tax charges are based on CO2 and not N2O emissions.

In practice, rather than simply producing an erroneous N2O readout, the defeat device controls the way the engine runs. This means that other emissions are affected, including CO2 . UK drivers may therefore find that the CO2 figure shown on their V5 is lower than their car’s actual emissions.

Thankfully, the Transport Secretary has confirmed that, because drivers could not have known about the incorrect CO2 figures, they won’t be asked to pay higher vehicle excise duty. There’s also good news for company car drivers and their employers. HMRC says that benefits in kind already calculated and declared by employers on P11Ds won’t need to be restated. So, there will be no backdated tax bills.

HMRC works from the CO2 figures shown on a vehicle’s V5, produced by UK and EU vehicle certification agencies (VCAs). These haven’t changed as a result of VW’s revelation. However, it remains to be seen what HMRC will do in subsequent years if the VCA changes its official CO2 figure.

If any of your employees drive VWs, it might be worthwhile giving them a copy of this article. Alternatively, you could pin one to the office noticeboard to head off any questions you might receive from worried company car drivers.

If you are in any doubt about your position in relation to this issue, please talk to your usual Thomas Croft contact as soon as possible.

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