Clause 16 - Duty at higher rate: exception for tractive units
Finance Bill
3:00 pm
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
I welcome the hon. Gentleman's welcome for the clause. He recognises the work of the FTA , which I am happy to confirm was helpful and influential.
The clause is intended to clarify the system of vehicle excise duty for lorries that we introduced in December 2001, which greatly simplified the structure of taxation for lorries by replacing more than 100 separate tax rates with seven tax bands that reflected the road wear and environmental impact of different types of lorries. In particular, it was intended to allow greater flexibility to operate a lorry at a variety of weight and axle configurations without the need to re-plate or re-licence it. That significantly reduced red tape for the industry and was greatly welcomed at the time.
The flexibility in the new structure for VED for goods vehicles relied on section 15 of the 1994 Act, which states that a vehicle becomes liable to VED at a higher rate when it is used in such a way as to render it liable to tax at a higher rate. Thus, a vehicle could be used at any weight or axle combination that rendered it liable to taxation at the same or a lower rate.
However, we became aware of a potential conflict between that interpretation and clause 60A of the Act, which states that the rate of tax at which a licence is issued is determined by the plated weight of the vehicle; in other words, the maximum weight at which a vehicle is permitted to operate. It became clear that there was a risk that operators who took advantage of the greater flexibility that we intended might leave themselves open to challenge and prosecution.
The aim of the clause is to resolve that conflict and make it clear that once a vehicle is licensed and on the road, it is the actual weight, not the theoretical maximum weight, of the vehicle that determines the tax liability, in line with the policy that we announced in 2001.