As with other motoring taxes, vehicle excise duty (VED) can be used to encourage the greater uptake of low emission vehicles by making such options more cost effective for motorists. VED on cars has traditionally been calculated on a CO₂ based model, and the Government is considering a similar measure for vans.
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. There may be a distinction in a SYR for vans that emit lower levels of emissions, but tax bands to determine van VED could be broadly similar to those currently used to determine car VED.
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 is pleased the Government is looking at van Vehicle Excise Duty (VED) as the tax regime can, if implemented appropriately, prove to be a powerful way of incentivising businesses and individuals to choose low emission vehicles. However, the current focus on a CO₂ based approach is premature as the full weight range of commercial vehicles doesn’t exist today. There is limited market availability of low emitting vans at present, with only 0.3% electric vans registered in 2017 compared with 98% diesel registrations in the same year.
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 is instead asking 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 includes a recommendation that the Government reconsiders the amount of support available through the current plug-in-grant regime. A further recommendation by the BVRLA is for much greater policy clarity on long-term consumer incentives, to stimulate cleaner van purchasing.
Where a new FYR is introduced, the association is calling 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 suggests any new van VED reforms should not be introduced until late 2021 at the earliest, to enable the impact of WLTP to be understood and to minimise additional complexity for members making purchasing decisions.
Finally, The BVRLA is calling for the Government not to penalise employees and taxpayers by introducing possible changes to Van Benefit Charge or Van Benefit Fuel Charge. Instead the association requests a wider consultation on how employee benefits are treated as part of vehicle taxation.
The BVRLA submitted a response to the Government's Van VED consultation in July 2018. The full response is available to read online, along with an associated press release.
Following the publication of the Government's response to it's 2018 Van VED changes consultation, the BVRLA continues to lobby politicians on this issue in face-to-face meetings.
The Government has responded to the 2018 consultation on Vehicle Excise Duty (VED) for vans, in which it outlined its key decisions as follows:
- Further develop its understanding of the impacts of WLTP on CO2 emissions for vans, ahead of announcing the new rates and bands, for introduction from April 2021
- Ensure the new system takes into account the weight of the van by introducing a 2-category approach
- Provide ongoing incentives, beyond the first-year, for new zero emission, ultra-low emission and other alternatively fuelled vans from April 2021