Vehicle Excise Duties and Vat on Cars

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

Alert me about debates like this

I have some major proposals on vehicle excise duty this year. Few things annoy honest motorists more than knowing that many people still drive without a tax disc and waste the time of police and the authorities in trying to track them down.
Earlier this year my right hon. Friend the former Secretary of State for Transport announced that the Government intended to move to continuous licensing. That means licensing on possession rather than use of a vehicle. We will be issuing a consultation paper setting out how we intend to do this. The move is designed to combat evasion and help fight crime by enabling the police accurately to check the ownership of vehicles.
I can, however, reassure the House that we will not seek to disadvantage those motorists, including classic car owners, who do not pay vehicle excise duty now because their cars are genuinely off the road.
I also intend to bring up to date the system of concessions and exemptions from vehicle excise duty. The existing highly complex arrangements go back, in some cases, to before the second world war and have little relevance to the modern world.
The number of different concessionary classes will be reduced from 132 to nine, a simplified and sensible handful. This will come into effect from 1 July 1995 and will yield about £30 million a year.
But the House will be pleased to hear that special treatment will still apply to cars for disabled drivers and emergency vehicles. Moreover, I have also decided that accessories for the disabled fitted in company cars will no longer be taxed as a benefit-in-kind from next April.
I propose to increase the rate of vehicle excise duty for cars—the tax disc—by £5, to £135. But to avoid adding to industry's costs, lorry duty rates will again remain unchanged.
I propose to introduce a significant change to one part of VAT relating to cars. Since 1992 taxi and car hire firms, unlike most businesses, have been able to recover the VAT on their cars. In response to industry's concerns about market distortion, I propose to extend this to cars bought by any business wholly for business use. This will mainly affect leased cars, with consequential changes to their VAT treatment when sold or leased on. The change should be revenue neutral in the long run, but will cost £140 million in the first year.