posted 3 years ago

DVLA Vehicle Excise Duty Income Plunges As Tax Disc Axed

DVLA Annual Report and Accounts 2015/16

Vehicle Excise Duty takings have plummeted since new rules came into force in 2014 such as abolishing the tax disc, The Driver & Vehicle Licensing Agency confirmed (DVLA). Its Annual Report and Accounts 2015/16 showed income from this source – to March 31st 2016 – was £5.930 billion compared to £6.023 for 2014/15 (-£93 million).

The DVLA said: "As the last tax discs issued expired on September 30th 2015, it is likely that during the transitional period - with customers becoming accustomed to the new tax changes - that VED (Vehicle Excise Duty) collection was affected". The new rules were:

  • no requirement to have a tax disc on the windscreen;
  • option to pay by Direct Debit;
  • Excise Duty no longer transferable when a vehicle is sold, so tax is automatically cancelled and any remaining months refunded to the seller. The buyer then has to arrange new tax.

Percentage of untaxed vehicles in United Kingdom

Vehicle Excise Duty revenue fell as the number of untaxed vehicles on the road increased. The Agency's Roadside Survey of 2015 showed that 1.4% fell fowl of the rules which represented a rise of 0.8% compared to a comparable survey in 2013. Vehicles were monitored by automatic number plate recognition cameras at 256 sites, in the UK.

The DVLA suggested that £80 million of its £93 million shortfall came via these untaxed vehicles. Some money was subsequently recouped via enforcement procedures, however. The Agency also emphasised that recent "changes to the collection procedures" coincided with the reduction of revenue and "may have contributed".

Excise Duty revenue falls as cars become more efficient

Vehicle Excise Duty income was expected to fall between 2014/15 and 2015/16 as vehicles became “more fuel efficient”, the Agency explained. Modern vehicle tax rates are, after all, based on emissions so manufacturers – partly for the environment and partly to encourage sales – ensure that each generation is less polluting.

Too early to assess new road tax rules

The Driver & Vehicle Licensing Agency suggested that it is premature to praise or condemn its new rules. The report concluded:

“While it is likely that the transition to new rules will have caused a temporary peak in non-compliance which will reduce as awareness improves, it is to early at this stage to draw a conclusion on whether the changes will result in a long term increase, or decrease, in non-compliance.”

The Agency explained: “Instances of non-compliance highlighted in the Roadside Survey include instances of deliberate evasion, but also unintentional non-compliance which may have increased as motorists adjust to the new rules. This hypothesis is consistent with - but cannot be proven via - the trend for non-compliance to be biased toward shorter periods where the vehicle was unlicensed.”

New Vehicle Excise Duty rules make RAC "fearful"

The RAC has long been concerned by the new rules, it said. It was "fearful" that scrapping the tax disc would cause a loss of revenue and further evasion. It is now “concerned” that losses are higher than the Government "estimate of £80 million over the course of 2015". 

RAC Spokesperson, Simon Williams, claimed: "Some may argue that a £93 million loss is only £13 million higher than expected, (but) this represents an increase of £58 million on the corresponding period before the tax disc was abandoned". 

He said the shortfall "far exceeds the £10 million savings arising from no longer issuing tax discs. This loss is a significant sum and one that merits further investigation", he said. On this basis, the RAC called for a Roadside Survey in 2016 – rather than waiting for 2017 as planned – to assess the situation then act as required. 

DVLA action to maximise compliance

The Driver & Vehicle Licensing Agency has already taken steps to increase compliance since its 2015 Roadside Survey. These include:

  • writing to all keepers of recently transferred used vehicles to clarify their obligations;
  • using reminder letters to address prolonged non-compliance;
  • targeting specific groups with appropriate measures to increase compliance.