Exempting zero-emission capable taxis from the Vehicle Excise Duty expensive car supplement
Published 6 July 2018
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Who is likely to be affected
Taxi drivers and businesses who have purchased a new purpose-built zero-emission capable taxi on or after 1 April 2017.
General description of the measure
This measure will exempt purpose-built zero-emission capable taxis from the Vehicle Excise Duty (VED) supplement for cars with a list price of over £40,000.
Policy objective
Given the technical requirements of purpose-built taxis, drivers have limited options when they make a purchasing decision. Most new purpose-built capable taxis are currently liable to pay the VED supplement as they have a list price of over £40,000. Drivers of other vehicles used as taxis or private hire vehicles/private hire cars have many choices of vehicle that cost less than £40,000. Therefore, as announced at Autumn Budget 2017, the government is legislating to exempt purpose-built zero-emission capable taxis from the VED supplement.
Background to the measure
A consultation on how to define a purpose-built zero-emission capable taxi in legislation closed on Tuesday 29 May 2018. A summary of responses and draft legislation were published on 6 July 2018.
Detailed proposal
Operative date
The change in the law will apply from 1 April 2019.
As the VED supplement is only payable from the second year of registration, this will mean that most new purpose-built zero-emission capable taxis, first registered on or after 1 April 2018, will be exempt. The exceptions to this are those vehicles first registered on or after 1 April 2018, that have been sold, transferred or are subject to a Statutory Off Road Notification (SORN) within the first twelve months after purchase. In these cases, the eligible taxis would be liable to pay the VED supplement until their VED is renewed on or after 1 April 2019.
Purpose-built zero-emission capable taxis registered on or after 1 April 2017 will pay the VED supplement until their VED is renewed on or after 1 April 2019.
Current law
Section 1 of the Vehicle and Registration Act (VERA) 1994 provides for the charging of VED. Section 2 of VERA provides that VED in respect of a vehicle of any description is chargeable by reference to the applicable rate specified in Schedule 1 of VERA.
Proposed revisions
Legislation will be introduced in Finance Bill 2018-19 to amend section 1GE(1) and section 1GE(3) of Schedule 1 of VERA so that purpose-built zero-emission capable taxis, as defined in regulations, are not liable to pay the VED supplement.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure is expected to have a positive impact on individuals who purchase purpose- built zero-emission taxis who will now benefit from the VED exemption.
There is no impact on family formation, stability or breakdown.
Equalities impacts
This measure will impact those sharing protected characteristics which are representative of purpose-built taxi buyers. Whilst the government does not have access to data on purpose-built taxi buyers, the Department for Transport has published data on the gender of registered keepers of cars and vans which show that those affected are more likely to be male than female.
Impact on business including civil society organisations
This measure is expected to have a positive impact on businesses who manufacture, purchase and operate purpose-built zero-emission capable taxis. The impact on administrative burdens is expected to be negligible. One-off costs include familiarisation with the new exemption. It is not expected that there will be any on-going costs.
There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
Noting the small number of vehicles in scope, this measure is expected to have a negligible operational impact.
Other impacts
Wider environment impact and carbon assessment: by strengthening the incentive to purchase zero-emission capable taxis over conventionally fuelled taxis, this measure is expected to contribute to the UK’s carbon emissions and air quality targets.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be evaluated and monitored through the DVLA vehicle licensing data.
Further advice
If you have any questions about this change, contact the Energy and Transport Taxes Team at the following email address: ETTAnswers@HMTreasury.gov.uk.