Government should revisit VED changes to encourage lower CO2 fleet buying
The re-elected government should revisit the Vehicle
Excise Duty changes that it made in the last Budget in order to encourage
fleets to buy more low CO2 vehicles, according to Meridian.
The medium-term rental specialist says that while it recognised there were
arguments for moving away from the old Vehicle Excise Duty system, the new
regime simply created too many anomalies when it came to low emissions.
Those issues were concentrated around two points - firstly, that nearly all
vehicles are subject to a £140 ongoing annual charge unless they have zero
emissions and, secondly, that all vehicles over £40,000 were subject to a £310
surcharge, whatever their CO2 output.
Phil Jerome, managing director, said: “There is something awry with a system
that means, on an annual basis after the first year, the driver of a 1.0 Fiesta
pays the same Vehicle Excise Duty as the person behind the wheel of a 5.0
“Also, Vehicle Excise Duty now penalises all drivers of cars over £40,000 quite
substantially, whatever their car. You could run a Tesla Model S with 0g/km and
pay nothing in the first year but £310 thereafter because it has a high list
price, which seems very odd.”
The old Vehicle Excise Duty system, with an annualised banded approach, had worked
well for many years, Mr Jerome added, and created an incentive to continually
push down CO2 for fleets.
He said: “It is a little bit of a mystery why the old banded VED system wasn’t
operated on the same basis as company car benefit in kind taxation, with a
gradual increase in payments at each level over time. That approach would make
A further point, he said, was that the new system did nothing to steer buyers away
from diesel cars, even though there were now large-scale concerns about their
effect on air quality.
Mr Jerome said: “Generally, if you are looking at a mainstream fuel, petrol
produces better air quality outcomes but there is no differentiation between
petrol and diesel under Vehicle Excise Duty.”
He added that the Vehicle Excise Duty changes had led
to an increase of around £1 per day per car at Meridian, even though the
company ran a very low emissions fleet.
“If you look at our own fleet, it is a microcosm of the lack of incentive that exists
for fleets to look at Vehicle Excise Duty in terms of emissions. Our average
CO2 is 108g/km, so we have chosen clean and efficient cars that, under the old
system, did not incur any Vehicle Excise Duty in the first year,” said Mr
“However, every car in our fleet registered after April 1, 2017 is now liable
for a first year Vehicle Excise Duty of between £100 and £160. This is even
true of some very clean mainstream cars such as the Volvo V40 D2, with its CO2
output of 89g/km.
“The only advantage of the new system is that it is
simple. But it simply doesn’t make much sense and it would be good to see the government
revisit it at the autumn Budget.”