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Mild Hybrid Tax Change

In the past few years, Mild Hybrid Technology (sometimes referred to a Hybrid assist, 12V or 48V Hybrids) has started to be offered across several OEMs ranges. This technology uses a starter/generator system to achieve 3 goals:

  1. Recover energy while braking
  2. Re-starting the combustion engine which stops when the vehicle is stationary
  3. Adding an electric boost when setting off from stationary to reduce engine load and lower emissions

When this technology was first appearing, the ruling from the DVLA and HMRC was that because these vehicles would never be propelled by electric power alone, as it would be in a full hybrid system, these would continue to be taxed for both their VED and BiK, as conventional Petrol or Diesel engines.

Last year, this ruling was changed, and now there are several ranges where the Mild Hybrid variants are being taxed at the lower rate for alternative fuel vehicles. This includes non-RDE2 compliant Diesel models.

For example, if a non-RDE2 compliant Diesel had a CO2 of 130g/km, the current first year VED would be £210. With the exact same CO2, a RDE2 compliant Diesel would be reduced to the same as a conventional petrol at a rate of £170. However a Mild Hybrid Diesel with the same 130g/km CO2 (regardless of its RDE2 status) would be given the Alternative fuel VED rate of £160.
Also irrespective of its RDE2 status, a Mild Hybrid Diesel would not be subject to the 4% BIK increase of non-RDE2 Diesel models.

There is a definite difference in the levels of electrification between Mild Hybrids, Self-Charging Hybrids, and Plug in Hybrids. For that reason we do not believe re-coding known Mild Hybrid Petrol and Diesel models to Petrol/Electric Hybrid and Diesel/Electric Hybrid in their CAP codes is the correct course of action.

The option of creating two new fuel types within CAP code was discussed, however, since this was a legislative change, the tax benefits of these vehicles will not have applied across the lifespans of some of these vehicles, nor is it guaranteed that they will continue to apply in future years as taxation continues to drive towards zero carbon emissions.

Furthermore, the taxation is dependent on what vehicles have been registered as, and due to earlier rulings, many known Mild Hybrid vehicles have not yet been re-classified as Alternative fuel.
For those reasons, in the coming week we will be adding and populating a new flag in our NVD technical data:

  • Alternative Fuel Qualifying

This will be set as “True” on all models from the effective date that the discount would apply from. In the event this changes in the future it will be set to “False”. This will include all Alternative fuel qualifying vehicles, including pure Electric and Plug-in Hybrids. Our first course of action is to populate for Mild Hybrids where it applies now, as those where the fuel type automatically qualifies for the discount are already clearly identified.

As the taxation is based upon what the vehicle is first registered as, this has not been automatically changed over for all Mild Hybrids when the ruling changed.

We are contacting OEMs to inform them of the ruling change to ensure all are aware of this. In order for the reduced BiK/VED to be applied, the OEM will need to re-submit their data to the approving body. For vehicles which have already been registered, these changes are not going to be automatically applied retrospectively.

This presents a simple one stop solution for identifying all vehicles benefiting from the Alternative Fuel Discount. Customers should integrate this field into their systems or request their 3rd party supplier to do so, this will ensure they are correctly showing the alternative fuel discount in their tax calculations.

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