Vehicle Excise Duty for vans meeting Euro IV standards was £110 last year, a £60 discount on the standard rate of £170.
But from the end of the year, this discounted rate was scrapped for new vehicles, effectively hitting fleets with a 54% tax increase to operate their vehicles.
The Government points out that the incentive was only a short-term measure to encourage early adopters of the latest technology, but critics say the impact is made worse because it coincides with major benefit-in-kind tax changes to vans.
The hike will be part of a double tax whammy to hit some van fleets next year, as drivers who have private use of vehicles will see their tax liability soar from April from £500 to £3,000, which will also push up companies’ National Insurance Contributions.
One fleet manager, who asked not to be named, said his fleet of 1,000 vans would be heavily hit by the changes.
He said: ‘This increase in VED obviously angers us, as we are facing a tax increase of more than 50%.
‘I don’t think there is a reasonable justification for this. We are now sourcing cleaner vehicles and being penalised.’
The fleet is currently struggling with the impact of the benefit-in-kind tax changes that come in to effect in April, which will see drivers pay tax on £3,000 for private use of their vehicles instead of £500.
The fleet manager said it was causing significant difficulties with drivers, who were reluctant to give up private use, but didn’t want to pay the increased tax.
In addition, if the issue can’t be resolved, the firm’s Class 1A National Insurance bill could rocket from under £64,000 to £384,000.
The fleet manager said: ‘Our running costs will increase considerably. This is unlikely to be absorbed and so will have to be passed on to the customer.’
A spokesman for the Society of Motor Manufacturers and Traders said the VED reduction was a good way of encouraging early adopters with financial savings compared to tax that would have been paid if the scheme hadn’t been put in place at all.