Car manufacturer Volkswagen (VW) has admitted that it has "totally screwed up" having been caught rigging emissions tests on diesel vehicles in the US. Whilst the company's share price has dropped over night and there could be tax implications for business car owners and company car drivers.

"Compared to petrol, diesel vehicles have significantly lower CO2 emissions per kilometre travelled because of the higher efficiency of diesel engines", says the UK's Department of Transport. Not, it seems if you are driving a VW. Your car's published emissions may be substantially lower than the genuine output.

VW today admitted that models sold outside of the US are also affected. It also remains to be seen whether any other manufacturers have tried VW's ruse and what emissions are being affected. The majority of modern cars are heavily dependent on software for their engine management.

Any change in a car's CO2 emissions will impact on anyone using a car in business:

  • If you are claiming Capital Allowances on a vehicle: the allowance claimed drops by 10% for vehicle with emissions over 130g/km.
  • The situation may not be ideal for company car drivers too. The taxable benefit of their car and its fuel is also determined by its emissions levels. A 2% increase in an emission level could increase your annual tax charge by around £800 per year.