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Finance Act 2014

Section 89: Payment of Vehicle Excise Duty by Direct Debit

Summary

1.This section allows vehicle excise duty (VED) to be paid by direct debit instalments with effect from 1 October 2014 and sets out what is the consequence of defaulting on payment.

Details of the Section

2.Subsection (2) provides for a new higher rate of VED where a 12-month vehicle licence is taken out and paid for by direct debit in one more than one instalment. Where a   12-month vehicle licence is paid by more than one instalment, the rate of VED is 105 per cent of the applicable annual rate for that vehicle.

3.The rate of VED that will apply to six-month vehicle licences paid for by means other than direct debit is 55 per cent of the annual rate of duty applicable to that vehicle. Where a six-month licence is paid for by direct debit, the rate is 52.5 per cent of the applicable annual rate for that vehicle.

4.Subsections (3) and (4) provide for a new higher rate of VED when a trade licence is taken out for a calendar year and paid by more than one instalment by direct debit. Where a 12-month trade licence is paid by more than one instalment, the rate of VED is 105 per cent of the applicable annual rate for that vehicle.

5.Where a six-month trade licence is taken out the rate of VED is 52.5 per cent of the applicable annual rate, where payment is by direct debit.

6.Subsection (6) provides for payment of VED to be made by instalments. In addition, it allows for the liability of the instalments to cease following a notification that the vehicle has been stolen, destroyed, a nil licence was obtained, a licence taken out at a reduced rate, notified off road, sold or disposed or exported.

7.Subsection (6) introduces a new provision where a person defaults on an agreement to pay monthly. Where a person defaults the Secretary of State will send a notice requesting payment of the outstanding value of VED. Failure to comply with this notice will result in a further notice being sent advising the person that the licence is void from a time specified in the notice.

8.Subsections (7) and (8) amend section 35A and section 36 of the Vehicle Excise and Registration Act 1994 so that those sections can also apply to failed payments by direct debit.

9.Subsection (9) provides for the amendments made by this section to come into force on 1 October 2014

Background Note

10.These provisions enable the Driver and Vehicle Licensing Agency (DVLA) to collect VED via direct debit monthly should motorists wish to pay by direct debit. Currently VED can be paid by cash, cheque and credit or debit cards but none of these payment methods allow the cost of VED to be spread.

11.Motorists will be able to pay VED via direct debit in an annual, one-off payment or 12 equal monthly payments.  A six month vehicle licence can also be paid for by direct debit. Paying for VED by direct debit does not alter the fact that a new licence may only be taken out provided the customer has a valid MOT in place.

12.At present, paying for a six-month vehicle licence costs 55 per cent of the applicable annual rate for that vehicle. This will reduce to 52.5 per cent if the payment is made by direct debit. Where a 12-month licence is paid by monthly instalments, the cost of the vehicle licence will be 105 per cent of the applicable annual rate for that vehicle.

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