Fleet News

VED: complications set in

THE new four-band graduated Vehicle Excise Duty system to come into effect in the autumn looks set to be more complicated than first expected, Fleet NewsNet learned this week. Chancellor of the Exchequer Gordon Brown is expected to relax the Government's interpretation of 'clean' and 'dirty' cars when he announces details of its long-awaited graduated VED scheme in next month's Budget.

The four-band scheme based on a vehicle's carbon dioxide emissions looks set to come into effect on November 1 and will apply to all new cars registered from that date. It will not apply retrospectively, prompting motor industry speculation that there could be a rush for so-called gas-guzzlers ahead of the introduction of the new regime. All vehicles on the road prior to November 1 will pay road tax based on the existing £100 and £155 tariffs.

Last year, Fleet NewsNet revealed that the four bands would see vehicles with a CO2 figure below 135g/km pay £100 VED a year, 136-180g/km £175, 181-240g/km £250 and above 240g/km £475. However, we understand that the bandings may be narrower and may not start as low as 135g/km because of the small number of vehicles currently available below the benchmark. In addition, the Driver and Vehicle Licensing Agency, responsible for VED, wants to ensure that its interpretation of a 'clean' car and a 'dirty' car is identical to the interpretation of the Inland Revenue, which is responsible for company car tax.

And we understand that within the four-band structure there will be different rates of duty for vehicles running on different fuels. In the House of Commons, junior minister in the Department of Environment, Transport and the Regions Keith Hill said: 'The system, which is being introduced on a revenue-neutral basis, will be introduced in a flexible way with the potential to create further incentives for cars which run on less polluting fuels.'

One industry source said over the next two to three years, graduated VED could be further refined to incorporate classes of vehicle within the four-band CO2 structure. That could see individual categories such as diesel cars, hybrid vehicles, panel vans, 4x4s and liquefied petroleum gas vehicles all having separate VED rates within the four-band system.

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee