Vehicle Excise Duty (VED)

The rental sector provides consumers and businesses with access to some of the very cleanest and newest vehicles on the UK’s roads – with average emissions declining by 11% over a five-year period. The price sensitive nature of this market means that it will be affected significantly by increases in VED due to the transition to WLTP.

The BVRLA called for the government to adjust future VED bands to account for the increase in WLTP-based CO₂ figures.

In its recent  response to the Review of WLTP and Vehicle Taxes, the government did not announce any changes to neutralise the WLTP impact on VED. However, it did commit to publish a call for evidence on VED later in the year seeking views on moving towards a more dynamic approach to VED which recognises smaller changes in CO2 emissions.

As with WLTP, the BVRLA will be seeking to secure a positive outcome for the sector. For example, the association is calling for the £320 VED surcharge on EVs to be either abolished or the current £40,000 threshold increased. This is one of many factors serving as a barrier to the uptake of EVs.

The Government proposes to introduce reform of van VED based on moving from a flat rate tax to carbon emission/environmental focused tax. This would be similar to reforms introduced to car VED, introducing a first year rate (FYR) and subsequently moving to a standard year rate (SYR) in future years. The proposed reforms would only cover vans weighing up to 3.5 tonnes. The Government has suggested ensuring any reforms are “fiscally neutral” meaning it would implement a small financial increase in any SYR to cover the lower cost of the FYR. In addition, the Government has indicated there may be future consultation on reforming the 'Van Benefit Charge' and the 'Van Fuel Benefit Charge'.

The BVRLA recognises the role tax can play to incentivise the purchase of cleaner vans, however there is a flaw in the current CO₂ based tax proposed as it fails to sufficiently factor the very limited number of cleaner vans currently available within the market.

The association asked the Government to focus on creating the right incentives and support to stimulate manufacturers to provide a greater number and weight range of cleaner van options. This included a recommendation that the Government reconsiders the amount of support available through the plug-in-grant regime. A further recommendation by the BVRLA was for much greater policy clarity on long-term consumer incentives, to stimulate cleaner van purchasing.

Where a new FYR is introduced, the association called for a minimum 5-year period to provide some stability for members. In addition, more consideration of how to incentivise a second-hand market for cleaner vans is required, as is greater clarity on the process of refunds for short-term fleet operators, such as rental fleets.

The BVRLA called on the Government not to penalise employees and taxpayers by introducing possible changes to Van Benefit Charge or Van Benefit Fuel Charge. Instead the association requested a wider consultation on how employee benefits are treated as part of vehicle taxation.

In its response to the van VED consultation, the government stated that it was minded to announce new bands and rates for introduction from April 2021, once the impacts of the current transition to WLTP can be fully determined.

Also, the government recognised that van drivers should not be penalised for using an essential business tool. In response, the government will introduce a 2-category approach, graduated by CO₂ when the van is first registered, followed by a standard rate from April 2021.

To minimise additional complexity for members making purchasing decisions, the BVRLA suggests any new van VED reforms should be delayed beyond 2021, if the evidence suggests that the impact of WLTP hasn’t been fully understood.