456 29 November 1994 VEHICLE EXCISE DUTY: CHANGES TO TAX CLASSES In his Budget statement today the Chancellor announced a comprehensive rationalisation of exemptions and concessions to VED. The current system is extremely complex. Some provisions date back to before the Second World War. As a result, it has become a source of tax evasion and avoidance, and is no longer targeted at those who most justify special treatment. Under the Chancellor's proposals, 75 per cent of those vehicles currently receiving special treatment will pay no more duty. But the number of concessionary and exempt classes will be reduced by over 90 per cent. Emergency vehicles, disabled drivers, and the large majority of tractors will be unaffected. The duty treatment of showmen's vehicles will be radically simplified, but in a broadly revenue neutral fashion. In most cases the increases in duty that do occur will be small. Almost half of those who face increases will pay less than Pounds 50 more. A few vehicles will face larger increases, but these will be no more than Pounds 1000 in the first year. The changes will take effect from 1 July 1995. For vehicles with current licences for concessionary classes outstanding on that date, the new rate of duty will apply from the date when that licence expires. For vehicles with exempt licences, these will expire on 30 June 1995. The Chancellor proposes: - to abolish the existing concessionary and exempt tax classes and create a new simplified structure comprising 3 new classes - * EMERGENCY VEHICLES which will be exempt from VED; * SPECIAL CONCESSIONARY with VED chargeable at one quarter of the PLG rate (Pounds 35); and * SPECIAL VEHICLES where VED is chargeable at the basic rate for HGVs (Pounds 150). Details of the changes by class of vehicle are set out in the attached supplement. Details of those who as a result will face changes to duty are set out in the table. - to rationalise the taxation structure for goods vehicles over 3.5 tonnes so that VED is chargeable on all vehicles by reference to "REVENUE WEIGHT", not plated weight. (The tax paid by the large majority of goods vehicles should be unaffected by this proposal); - to replace the Hackney tax class with a new "BUS" class to cater for vehicles with 9 seats or more; vehicles with 8 seats or less, including taxis, private hire and lease vehicles will tax in the Private and Light Goods (PLG) class. This move, which should not itself increase taxation for taxis, follows representations from various trade interests; Commenting on the Chancellor's Budget proposals, Dr Mawhinney said: "The existing, highly complex, taxation structure goes back, in some cases, to before the Second World War. This has made the system difficult to administer and, therefore, made evasion difficult to detect. These proposals will enable special treatment to be concentrated on those who best merit it, while making the system simpler and more transparent. They should be welcomed by all who are concerned about the complexities of the system and the levels of evasion." NOTES TO EDITORS 1. Vehicle excise duty (VED) is levied under the Vehicle Excise and Registration Act 1994. The Department of Transport administers the collection of duty, but decisions on rates are the responsibility of the Chancellor of the Exchequer. 2. Outside the 56 HGV classes and the standard rate of VED for cars, light vans, etc. there are currently 132 concessionary and exempt rates of duty. These proposals will simplify the system and reduce the number of rates to 9. 3. Further details of the proposals and tax class/rate changes are set out in the attached supplement and table. 4. A Compliance Cost Assessment is available, copies of which can be obtained from the Department of Transport Press Office, 2 Marsham Street, London SW1P 3EB, tel 0171-276-5185. SUPPLEMENT 1. The Chancellor proposes to abolish or replace the current concessionary tax classes for all farmers' vehicles (excluding tractors), Showmen's Light Goods, Recovery vehicles, Restricted Goods vehicles (including tower wagons) and the exempt tax classes for Road Construction, Street Cleansing, Street Lighting and vehicles used less than 6 miles a week between the keeper's lands of occupation. 2. Under the new structure, there will be three main categories of special treatment: - "EMERGENCY VEHICLES", Ambulance, Fire Engine, Fire Service, Mine Rescue, Lifeboat Haulage, Lighthouse Authority and Police vehicles, will be exempt from VED. - a new umbrella tax class "SPECIAL CONCESSIONARY" will include Agricultural Machines (including tractors), Mowing Machines, Electric vehicles, Snowploughs and Gritting vehicles. The rate of duty will be Pounds 35. - A new umbrella tax class "SPECIAL VEHICLES" will include Mobile Cranes, Digging Machines, Works Trucks and Road Rollers over 3.5 tonnes. The rate of duty will be Pounds 150. Showmen's Goods and Haulage vehicles will also move into this class, while their vehicles under 3.5 tonnes will move to the Private and Light Goods (PLG) tax class at a rate of Pounds 135. 3. Goods vehicles over 3.5 tonnes will be taxed according to "REVENUE WEIGHT". For this purpose "revenue weight" means either "confirmed maximum weight", determined by the Plating and Testing Regulations, or "design weight" for vehicles not subject to plating and testing (currently known as "Restricted HGV"). "Design weight" is the maximum weight at which a vehicle can lawfully operate laden in the UK. 4. The "Hackney" tax class (Buses and taxis) will be replaced by the "BUS" class and will apply to Buses with 9 or more seats that meet with the Public Service vehicle definition. Vehicles with 8 seats or less, which include taxis, self-drive and leased vehicles will tax in the PLG tax class. 5. In future all rates of VED will be explicitly linked either to the PLG or HGV tax classes. The classes linked to PLG include vintage (pre-1947) vehicles, motorcycles and tricycles and Special Concessionary vehicles. The Special Vehicles and Bus classes will be linked to the Basic Rate (the minimum HGV rate). Future increases in either the PLG or Basic Rate levels of duty will automatically raise other rates in proportion. CHANGES IN VED RATES AND TAX CLASSES CATEGORIES OF VEHICLE CURRENT RATE PROPOSED RATE Farmers (1) - Light goods Pounds 85 Pounds 135 - HGV Pounds 100 - Pounds 2550 Pounds 290 - Pounds 5000 (3) - Restricted HGV Pounds 100 Pounds 150 - Pounds 5000 (3) Showmen - Light goods Pounds 85 Pounds 135 - HGV Pounds 100 - Pounds 1065 Pounds 150 (2) - Restricted HGV Pounds 100 Pounds 150 (2) - Trailer (supplement) Pounds 80 Pounds 135 - Pounds 370 Special vehicles <3.5T >3.5T - Mobile cranes Pounds 35 Pounds 135 Pounds 150 (2) - Digging machines Pounds 35 Pounds 135 Pounds 150 (2) - Works trucks Pounds 35 Pounds 135 Pounds 150 (2) - Road Rollers NIL Pounds 135 Pounds 150 (2) Special concessionary - Agricultural machine Pounds 35 Pounds 35 - Mowing machine Pounds 35 Pounds 35 - Electric NIL Pounds 35 - Gritter NIL Pounds 35 - Snowplough NIL Pounds 35 Recovery vehicles Pounds 85 Pounds 135 - Pounds 5000 (3) Road construction NIL Pounds 135 - Pounds 5000 (3) 6 miles a week vehicles NIL Pounds 15 - Pounds 5000 (3) Tower wagons Pounds 130 - Pounds 150 Pounds 135 - Pounds 5000 (3) Street cleansing NIL Pounds 135 - Pounds 5000 (3) Street lighting NIL Pounds 135 - Pounds 5000 (3) Restricted HGV Pounds 150 Pounds 150 - Pounds 5000 (3) Police vehicles Pounds 15 - Pounds 5000 NIL Notes: (1) Farmers tractors will largely be unaffected by the changes. (2) Move to special vehicles class. (3) No increase of more than Pounds 1000 in first year. Press Enquiries: 0171 276 0888; out of hours: 0171 873 1985 Public Enquiries: 0171 276 0800 DVLA Press Enquiries: 01792 782318; out of hours: 0171 873 1985 DVLA Public Enquiries: 01792 782318