The SMMT is not happy with the latest VED changes

The SMMT is not happy with the latest VED changes

The SMMT has voiced 'considerable concern' over vehicle tax changes announced by the government in its Budget statement.

The UK government Chancellor, George Osbourne, announced a new Vehicle Excise Duty (VED - an annual tax on vehicles in use also known as 'road tax') banding system for cars registered on or after 1 April 2017 to replace the existing system. Revenues will, in future, go towards a new roads fund to pay for road infrastructure, the Chancellor said (a long-standing concern for motorists in the UK has been that it has been effectively syphoned off into the general taxation take).

For cars registered after 1 April 2017, VED will be transformed into three bands - zero, standard and premium. The 'standard' charge of GBP140 will cover some 95% of all cars, the Chancellor said. Revenues will be paid into the Roads Fund from 2020-21.

First year rates will vary according to the vehicle's CO2 emissions. The flat standard rate of GBP140 applies to all cars for subsequent years, except those emitting 0g/km of CO2, for which the standard rate will be zero. Cars, including zero-emission cars, with a list price above GBP40,000 will be subject to a GBP310-per-year supplement for the first five years in which the standard rate is paid.

The SMMT's objection mainly arises from the lack of differentiation in the new rates for low emission vehicles.

Mike Hawes, SMMT Chief Executive, said: "We recognise the current VED system needs to be reformed and highlighted this in a recent report. The Chancellor's Budget announcement on the regime came as a surprise and is of considerable concern. While we are pleased that zero-emission cars will, on the whole, remain exempt from VED, the new regime will disincentivise take up of low emission vehicles.

"New technologies such as plug-in hybrid, the fastest growing ultra low emission vehicle segment, will not benefit from long-term VED incentive, threatening the ability of the UK and the UK automotive sector to meet ever stricter CO2 targets."

However, Hawes also drew attention to the penalisation of high value cars, via the additional supplement.

"The introduction of a surcharge on premium cars also risks undermining growth in UK manufacturing and exports.

"British-built premium cars are in increasing demand at home and globally, and the industry helps to support almost 800,000 jobs in the UK. Levelling a punitive tax on these vehicles will almost certainly impact domestic demand."