VED tax hit on rentals
Even plug-in hybrids will be subject to road tax under rules for new cars from April 2017
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New VED system on vehicles 1st reg from April 1, 2017

  • First-year road tax £0 for zero emissions
  • First-year 1-100g/km CO2 emission (currently £0) rising scale from £10 to £120
  • First-year 101-255+g/km rising scale £140 to £2,000
  • Subsequent 5 years all emissions from 1g/km levied £140 standard rate – zero emissions £0
  • Also subsequent 5 years all vehicles including zero emissions list price over £40,000 levied £310 premium supplement in addition to standard rate

ON the eve of the Autumn Statement the BVRLA is calling for a £30m VED tax hit on rentals to be put on hold – just four months before the scheduled upheaval in the Vehicle Excise Duty regime next year.

It was 16 months ago, in the 2015 Summer Budget, that the previous Chancellor of the Exchequer George Osborne announced that a new taxation system will be introduced for cars registered after 1 April 2017.

The first year tax for new cars will still be linked to CO2 emissions, but in subsequent years the tax will be calculated according to every gram of CO2 emissions, with a standard rate of £140 a year ending free road tax for under 100g/km.

And on top of that cars with list price over £40,000 – including zero emissions like Teslas – will face an extra £310 levy for five years, making the bill £450 a year.

Rental companies have said that if they were to operate similar fleets from April 2017, these changes would see them hit with a tax rise of £31.4m. In order to mitigate against this tax rise, car rental firms have said they will operate their fleets for longer.

Data supplied to the BVRLA by rental companies suggests this will result in over 29,000 fewer new car registrations by car rental firms next year.

Ahead of tomorrow’s Autumn Statement, BVRLA chief executive Gerry Keaney has urged new Chancellor Philip Hammond to defer or phase in the implementation of the first year VED rates.

He said: “Rental companies account for a substantial proportion of new car purchases in the UK, and if these reforms go through, the Government will seriously damage its green agenda and its air quality goals.

“Many of these cars are ultra-low emission vehicles, and by introducing these VED reforms, the government will be adversely hampering its overall goal to drive the take-up of clean vehicles and improve road safety.”

The BVRLA believes that the VED changes will result in rental companies choosing to keep their existing fleet longer. By doing this – instead of purchasing new cars – even fewer modern, clean, safe vehicles will be purchased and put on to the UK’s roads.

Furthermore, it will reduce the supply of these nearly-new vehicles into the second-hand marketplace, preventing more motorists from accessing affordable low-emission cars.

The proposals will also prevent the industry from claiming £1.67million every year in legitimate refunds. Car rental companies operate the newest fleet on UK roads, and the average rental car is just eight months old.

However, from April 2017, rental companies will no longer be able to reclaim the full first year rate of tax on any vehicle they dispose of which emits more than 110 g/km CO2 – a new first year tax band from £160 to £2,000.

Keaney said: “We are calling for these complex refund rules to be removed so that anybody selling their car is fairly entitled to claim back the full amount of unused tax owed to them.

“Tomorrow’s Autumn Statement gives the new Chancellor the perfect opportunity to show leadership and signal that he clearly understands the negative impact these changes to the VED system could have on the UK automotive industry.”

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