H.M. TREASURY

EXPLANATORY NOTE

CLAUSE 22: VEHICLE EXCISE DUTY FOR NEW CARS AND VANS
SCHEDULE 3: VEHICLE EXCISE DUTY ON NEW CARS AND VANS:NEW PARTS IA AND IB OF SCHEDULE 1 TO THE VEHICLE AND REGISTRATION ACT 1994

SUMMARY

This clause and schedule provide for the introduction of a four-banded system of VED for new cars first registered from March 1, 2001, graduated by their carbon dioxide emissions and the type of fuel they use, and set a VED rate of £160 for new vans and other light goods vehicles for which carbon dioxide emissions data are not currently available.

DETAILS OF THE CLAUSE AND SCHEDULE

The clause gives effect to the schedule of rates of VED for light passenger vehicles and light goods vehicles first registered from March 1, 2001.

Sub-sections (1) and (2) of Section 1A of Part IA of the schedule specify the categories of vehicle to which the new graduated rates of VED for light passenger vehicles will apply from March 1, 2001.

Sub-sections (3) and (4) of Section 1A of Part IA of the schedule specify the figures which will be used to determine the applicable carbon dioxide emission rates for the vehicles affected by the new graduated rates of VED.

Sub-section (5) of Section 1A of Part IA of the schedule specifies that the effects of the above sub-sections will remain fixed for all vehicles first registered from March 1, 2001 and cannot be altered by subsequent modifications of those vehicles.

Section 1B of Part IA of the schedule sets out the new annual rates of VED payable in respect of the vehicles described in Section 1A of Part IA. It contains a table setting out the carbon dioxide emission bands, and the reduced, standard and premium rates of VED within those bands - as explained below.

Sub-sections (1), (2), (3) and (4) of Section 1C of Part IA of the schedule sets out the three conditions under one or more of which a vehicle may be certified as being eligible for the reduced rate of VED, and gives regulatory powers to the Secretary of State to prescribe the types of fuel or pollution-reducing equipment, or the emissions standards, which will determine whether a vehicle qualifies to be so certified.

Sub-section (5) of Section 1C of Part IA of the schedule confers on the Secretary of State regulation-making powers concerning the procedures by which vehicles will be certified as being eligible for the reduced rate of VED.

Section 1D of Part IA of the schedule specifies the types of vehicle which will pay the standard rate of VED (i.e. all vehicles which will not pay either the reduced or premium rates).

Sub-sections 1 and 2 of Section 1E of Part IA of the schedule specify the types of vehicles which will pay the premium rate of VED (i.e. all vehicles powered solely by diesel except for those meeting a prescribed description) and specifies the definition of 'diesel' to be used for the purposes of this provision.

Section 1F of Part IA of the schedule sets out the regulation-making powers given to the Secretary of State under Sections 1C and 1E of Part IA of the schedule.

Sub-sections (1) and (2) of Section 1G of Part IA of this schedule specify the definitions of the terms 'EC certificate of conformity' and 'UK approval certificate' used in the schedule.

Sub-sections (1) and (2) of Section 1H of Part IB of the schedule specifies the vehicles which will be charged VED in a new class for light goods vehicles from March 1, 2001.

Sub-section (3) of Section 1H of Part IB of the schedule specifies that the effects of sub-sections (1) and (2) of Section 1H of Part IB of the schedule will remain fixed for all vehicles first registered from March 1, 2001 and cannot be altered by subsequent modifications of those vehicles.

Section 1J of Part IB of the schedule sets out an annual VED rate of £160 payable in respect of vehicles affected by sub-sections (1) and (2) of Section 1H of Part IB of the schedule.

BACKGROUND

From March 2001, a graduated VED system for new cars will be introduced. Under this system, all new cars first registered from that date will go into one of four VED bands according to their rate of carbon dioxide emissions.

Within each band, there will be a £10 discount for cars using cleaner fuels and technology. Initially, this will include cars run on road fuel gas, bi-fuel and dual fuel cars, and cars using hybrid technology.

Within each band, there will also be a supplement for diesel cars to reflect their higher emissions of particulates and other pollutants which damage local air quality. The system will be built in a flexible way so that the treatment of diesel cars can be reviewed as their emissions standards improve.

The table below sets out the bands and rates for the new system, including some examples of where the most fuel-efficient models of popular new cars will go.

CO2 bands (g/km)	% of new cars (2000-01)	Fuel-efficient models of popular petrol (p) & diesel (d) new cars	Clean fuels	Petrol	Diesel
A ¦150g	20%	Ford Focus (d), Ford Fiesta (d), Vauxhall Corsa (p), VW Polo (p), Fiat Punto (p)	£90	£100	£110
B ¦165g	25%	Vauxhall Astra (d), Ford Focus (p), Ford Ka (p) Renault Clio (p), Nissan Micra (p), Ford Fiesta (p)	£110	£120	£130
C ¦185g	25%	Vauxhall Vectra (p), Vauxhall Astra (p), Rover 400 (p), Ford Mondeo (p)	£130	£140	£150
D 186g+	30%	Peugeot 406 (p)	£150	£155	£160

New light goods vehicles (e.g. vans) for which there is currently no carbon dioxide emissions data available will pay £160 VED.

Under this new system, 95% of new cars will pay from £5 up to £70 less than under the rates for existing cars. Petrol models of Britain's best-selling new cars - the Ford Focus and Fiesta - will pay up to £40 less; while petrol models of the Vauxhall Astra, Rover 400 and Ford Mondeo will pay up to £20 less.

The new graduated VED system is intended to encourage the use of new cars as opposed to older cars, cars with lower CO2 emissions and better fuel-efficiency, and cars using cleaner fuels and technology.

In response to requests from motor manufacturers and traders for additional time to prepare, the Government has extended the timetable for introduction of the graduated VED system for new cars from Autumn 2000 to March 2001. This will coincide with the introduction of Y-registration number plates so it will be easy to distinguish cars which will pay VED under the new system.

The DVLA will continue to work with manufacturers, traders and other bodies throughout the year to collect the information and introduce the systems on which the new scheme will be based. To ensure public awareness and understanding of the new system, DVLA will also be launching an extensive publicity campaign to explain the changes and promote the financial and environmental benefits of choosing cleaner cars: not only from cutting down on VED and fuel bills, but also from cutting down on emissions of carbon dioxide and local air pollutants.