1.Section 14 provides for changes in the rates of vehicle excise duty (VED) in 2010-11 by amendment of the Vehicle Excise and Registration Act 1994 (VERA). Changes to the rates take effect in relation to vehicle licences taken out on or after 1 April 2010. Schedule 4 amends VERA to specify the scope of the application of rates of VED payable on a first vehicle licence on a car from 1 April 2010, and to specify the application of VED rates to vehicles registered in the United Kingdom subsequent to a period of registration overseas.
2.Subsection (2) amends paragraph 1(2) of Schedule 1 to VERA to increase the general rate of VED by £15 to £205 save for vehicles with an engine size of 1549cc or less.
3.Subsection (3) introduces the amendments made to paragraph 1B of Schedule 1 to VERA to bring into effect separate rates of duty payable on the first vehicle licence on a light passenger vehicle (a car), as well as to change rates of duty payable on other licences for cars first registered on or after 1 March 2001.
4.Subsection (4) amends paragraph 1B of Schedule 1 to VERA to specify that the annual rate of duty applicable to a car registered on or after 1 March 2001 shall be determined in accordance with the tables substituted for the existing table by subsection (7).
5.Subsections (5) and (6) inserts new sub-paragraph 1B(c) to Schedule 1 to VERA to add an additional factor to those determining the annual rate of vehicle excise duty applicable to a car registered on or after 1 March 2001. Reference is to be made to whether the duty is payable on the first vehicle licence for the vehicle.
6.Subsection (7) substitutes new rates Table 1 and Table 2 for the existing rates table, to provide rates payable on a first vehicle licence on a car, and on all other licences for cars registered on or after 1st March 2001. Table 2 operates so that cars emitting over 225 grammes of carbon dioxide per kilometre that were registered in the United Kingdom or overseas before 23 March 2006 pay a lower rate than those registered from 23 March 2006 onwards
7.Subsection (8) amends paragraph 1J(a) of Schedule 1 to VERA to increase by £15 to £200 the rate of duty for those Light Goods Vehicles which are not lower-emission vans. Lower-emissions vans are models which met the Euro 4 air quality pollutant emissions standard early and were registered on or after 1 March 2003 and before 1 January 2007, or that meet the Euro 5 pollutant emissions standard early and are registered on or after 1 January 2009 and before 1 January 2011.
8.Subsection (9) introduces the Schedule which contains further provisions about rates of duty including the application of rates of duty payable on a first vehicle licence for a car.
9.Subsection (10) provides that all new rates under this section will take effect for licences taken out on or after 1 April 2010.
10.Paragraph 2(2) amends section 3(4)(b) of VERA to reflect the fact that the expression ‘first vehicle licence’ is to become a defined term in VERA.
11.Paragraph 2(3) inserts new section 3(7) into VERA to make an exception to the general rule that a licence may be taken out for a period of six months where the annual rate of duty exceeds £50. This exception applies in the case of a first vehicle licence, as defined by amendment to VERA under Paragraph 4 (2) of this Schedule, where allowing a six-month period of licensing would lead to a lower rate of VED being chargeable over the first year as a whole.
12.Paragraphs 3(2) and (3) amends sections 19(1) and (2) of VERA to provide that the person applying for a rebate on a licence that is currently in force for a vehicle may receive ‘the relevant amount’. This amendment is consequential on the other amendments to section 19 of VERA made by paragraph 3 of the Schedule to the Act.
13.Paragraph 3(4) inserts new sections 19(3A) and (3B) into VERA, which relate to the method of calculation of the amount of a rebate on a licence. A reference to ‘the relevant amount’ is inserted by the amendment and it is specified that the method of calculation is subject to an exception. The exception is that, where the annual rate of VED on a vehicle’s first vehicle licence was higher than it would have been if it had not been the first licence taken out on the vehicle, any rebate shall be calculated by reference to the lower rate of VED, rather than the rate of VED actually paid. The exception only applies where the application for a refund is made by virtue of section 19(3)(d), (e) or (f) of VERA.
14.Paragraph 4 (2) amends section 62(1) of VERA to define the expression ‘first vehicle licence’ for the purposes of the Act. A nil licence will not count as a first vehicle licence.
15.Paragraph 4 (3) inserts new sections 62(1B) and (1C) into VERA. Section 62(1B) specifies that where a vehicle has been registered on the issue of a temporary licence, the first vehicle licence is the licence issued following the temporary licence. Section 62(1C) provides that there is deemed to be no first vehicle licence in respect of a specified category of vehicle. This category consists of any vehicle which has previously been registered outside the United Kingdom, and, at its first registration in the United Kingdom, more than six months have passed since its first registration overseas, and it has been driven further than 6,000 kilometres.
16.Paragraph 5 (2)(a) amends paragraph 1A(1)(a) of Schedule 1 to VERA which specifies the circumstances in which the graduated rates of duty apply to cars registered after 1 March 2001. These circumstances are described by reference to first registration of the vehicle. The amendment provides that for these purposes it makes no difference whether the vehicle is first registered in the United Kingdom or overseas.
17.Paragraph 5 (2)(b) makes the same change to paragraph 1A(5) to Schedule 1 of VERA. The effect of paragraph 1A(5) is that the application of the graduated rates of duty is unaffected by modifications which take place after first registration of the vehicle.
18.Paragraph 5 (3)(a) and (b) make the same change to paragraphs 1C(3)(a) and 1C(3)(b) of Schedule 1 to VERA. These provisions of VERA apply a reduced rate of duty to a vehicle which is before first registration (or subsequently) fitted with equipment to meet prescribed emissions standards.
19.Paragraph 5 (3)(c) amends paragraph 1C(4) to Schedule 1 of VERA. This provision of VERA applies a reduced rate of duty to a vehicle which is certified by the Secretary of State before first registration as meeting prescribed emissions standards. The amendment provides that here it is first registration under VERA to which reference is being made.
20.Paragraph 5 (4)(a) amends paragraph 1H(1)(a) of Schedule 1 to VERA which specifies circumstances in which rates of duty other than the general rates apply to a light goods vehicle. These circumstances are described by reference to first registration of the vehicle. The amendment provides that for these purposes it makes no difference whether the vehicle is first registered in the United Kingdom or overseas.
21.Paragraph 5 (4)(b) makes the same change to paragraph 1H(3) of Schedule 1 to VERA. The effect of paragraph 1H(3) is that the application of rates of duty to a light goods vehicle is unaffected by modifications which take place after first registration of the vehicle.
22.Paragraph 5 (5) makes the same change to paragraph 1K(a) of Schedule 1 to VERA. The effect of paragraph 1K(a), when read with paragraph 1J, is to apply a particular rate of duty to a lower-emission van first registered on or after 1 March 2003 and before 1 January 2007.
23.Paragraph 5 (6) makes the same change to paragraph 1M(a) of Schedule 1 to VERA. The effect of paragraph 1M(a), when read with paragraph 1J, is to apply a particular rate of duty to certain types of lower-emission van first registered on or after 1 January 2009 and before 1 January 2011.
24.Paragraph 6 (2) inserts new paragraphs 25(2) and (3) into Schedule 2 to VERA to establish an exemption from duty for vehicles in the period of their first vehicle licence. This exemption applies to light passenger vehicles first registered in the UK or overseas on or after 1 March 2001 that have a CO2 emission value which exceeds 100g/km but not exceeding 130g/km.
25.Paragraph 7 (1) provides that, subject to Paragraph 7(2) of this Schedule, the amendments made by this Schedule will take effect for licences taken out on or after 1 April 2010.
26.Paragraph 7 (2) provides that amendments made by Paragraph 5 of this Schedule do not apply to vehicles first registered under VERA before 1 April 2010.
27.VED was reformed in 2001 when a carbon dioxide (CO2) emissions based system was introduced for cars registered from 1st March 2001 onwards. This is part of the Government’s policy to use transport taxes to create incentives for the reduction of emissions. Cars and vans registered before 1 March 2001 are treated for VED on the basis of engine size, and are charged the general rate of VED. Vans registered on or after 1 March 2001 are treated for VED according to whether they qualify for a reduced rate by having met reduced pollutant emissions standards early. These standards have been agreed at a European level and are intended to improve air quality.
28.The reduced rate of VED for post-2001 cars under Subsection (3) applies to cars using alternative fuels or featuring a hybrid fuel-electric powertrain. Alternative fuels include Liquefied Petroleum Gas, Compressed Natural Gas and high blend (85 per cent content) bioethanol.
29.For 2010-11 the Government intends to introduce First-Year Rates of VED payable on a first vehicle licence for a new car. Cars emitting up to 130g/km of CO2 will be exempt from VED on a first vehicle licence in 2010-11. Cars emitting between 131 and 165g/km will pay the same rate of VED on their first vehicle licence as on all subsequent licences. Cars emitting over 165g/km will pay a higher rate on the first vehicle licence than on subsequent licences, up to a top rate of £950. The intention is that first vehicle licence rates should apply only to brand new cars and almost new imported used cars.
30.For other cars already registered on or after 1 March 2001 to which first vehicle licence rates will not apply, the Government intends to apply increases and decreases of up to £30 depending on the CO2 emissions of the car.
31.The Government intends to maintain the exemption from the top rate of VED for cars that have a CO2 emissions value which exceeds 225g/km but were first registered before 23 March 2006, as provided for by Subsection (7).
32.In 2010-11, the Government intends to increase by £15 the rates for larger engine size (over 1549cc) pre-2001 cars and the standard rate for post-2001 vans (those that are not lower-emissions vans). The changes in rates apply to all vehicle licences taken out on or after 1 April 2010 regardless of the commencement date of the licence.
33.For 2010-11 the Government intends to introduce First-Year Rates of VED payable on a first vehicle licence for a new car. Cars emitting up to 130g/km of CO2 will be exempt from VED on a first vehicle licence in 2010-11. Cars emitting between 131 and 165g/km will pay the same rate of VED on their first vehicle licence as on all subsequent licences. Cars emitting over 165 g/km will pay a higher rate on the first vehicle licence than on subsequent licences, up to a top rate of £950. The intention is that first vehicle licence rates should apply only to brand new cars and almost new imported used cars.
34.Six-month licence rates are generally available where an annual rate of duty on a vehicle licence exceeds £50, and are chargeable at 55 per cent of the annual rate. Paragraph 2(3) of this Schedule provides an exception in the case of certain first vehicle licence rates for cars. The exception is intended to remove the possibility of paying less than the full annual rate of duty on a car’s first vehicle licence by taking out a six month licence as the first vehicle licence.
35.VED rebates are available to registered vehicle keepers on any unexpired complete months remaining on a vehicle licence, where the registered keeper’s circumstance is one of those set out in section 19 of VERA. Paragraph 3 of this Schedule provides an alternative method of calculation for refunds, in the case of first vehicle licence rates for cars where the licence rate for a subsequent licence is lower than the first vehicle licence rate, and in the case where the refund is for a licence on a vehicle that has been sold, exported or has a Statutory Off-Road Notification in force. This method of calculating the level of refund has been adopted to remove the possibility of paying less than the full annual rate of duty on a car’s first vehicle licence by taking a refund on the first vehicle licence which is at a higher rate than the rate that would apply in relation to a subsequent licence.
36.A first vehicle licence is the licence on the issue of which a vehicle is first registered in the UK, except for the exception inserted by paragraph 4(3) of this Schedule. This exception is intended to remove the possibility to pay less than the full annual rate of duty on a car’s first vehicle licence over a twelve month period by importing an almost-new car into the UK. The intention is to use an existing definition of what constitutes a new vehicle, which has been translated from the Value Added Tax Act 1994 (section 95). This defines a car as new unless more than six months have elapsed since its first entry into service and it has travelled more than 6,000 kilometres under its own power. Imported cars not considered to be new according to this definition will not be issued with a first vehicle licence and will not be charged associated First-Year Rates of duty.
37.With effect from 1st April 2010, periods of registration outside of the UK will be taken into consideration for licensing purposes, for vehicles imported into the UK on or after 23 March 2006. This change is intended to ensure that vehicles pay similar rates of duty, whether or not they were first registered in the UK, subject to paragraph 4(3) of this Schedule.
38.Cars emitting below 130g/km of CO2 will be exempt from VED for the period for which the first vehicle licence would otherwise apply. For subsequent licences the threshold for the exemption changes to 100g/km.