Policy Area

VED Reform

The car rental industry could be hit with a tax rise of more than £30 million if the government goes ahead with its plans to change the Vehicle Excise Duty regime in April.

What is changing?

In the 2015 Summer Budget, the previous Chancellor of the Exchequer, George Osborne, announced that a new taxation system will be introduced for cars registered after 1st 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 the vehicle’s list price.

What is the impact?

  • In 2016, UK rental companies purchased around 324,000 new cars, with 1 in every 3 being either wholly manufactured or containing a major element built in the UK.
  • The proposed changes will lead to the average duty paid for a new car to rise to £170 per car, up from £36 under the old system, amounting to over £55 million in total, compared to £11 million in 2016
  • As a result of these changes, rental companies are likely to change their purchasing decisions, with an estimated 24,800 fewer cars being purchased 
  • In 2016, the purchase of 24,800 cars supported a value added contribution of £84 million to UK GDP, also supporting 1,270 jobs and £23 million in tax receipts to the Exchequer
  • Vehicles purchased by the rental sector are typically more efficient than the average new car on UK roads (116.3g CO2 per kilometre, compared to 121.4g CO2/km), so the proposed changes are likely to impact upon emissions targets. 
 
A further more detailed analysis of the impact of the VED reform is available in the Oxford Economics report, the economic impact of vehicle excise duty reform.
 

How can BVRLA members help?

You can support us by:
  • Writing to your local MP to tell them about your concerns and asking him/her to raise the issue with Jane Ellison, Financial Secretary to the Treasury. You can download a template for such a letter, and find your MP’s contact details here.
  • Making your customers aware of the impact of these changess and encouraging them to get in touch with their MP.
 
The BVRLA will keep members up-to-date on this issue. If you have any questions or feedback in the meantime, please get in touch with Senior Policy Advisor, Patrick Cusworth on 01494 545712 or patrick@bvrla.co.uk