Businesses call for caution over low emission van tax break

Tax breaks for low emission vans could ‘unfairly impact small businesses’ and should be postponed until more models are commercially available to the market, industry bodies have claimed.

The British Vehicle Rental and Leasing Association (BVRLA) and Federation of Small Businesses (FSB) made the comments in response to a consultation by the Treasury on proposals to change the Vehicle Excise Duty (VED) tax rate to incentivise businesses to switch to lower emission vans.

Small businesses could be slow to adopt newer low emission van technologies due to the initial cost of investment, trade bodies have claimed

The proposals, which were consulted on in the early summer, would see Van VED changed from being charged at a flat rate of around £250, to being graduated in the first year for new vans based on CO2 emissions.

Under the planned changes, vans with CO2 emissions between 1-50g/km would pay a proposed first year rate of £10, followed by a standard rate of £125. In comparison, vans with higher emissions would pay between £25 and £500 in first VED, followed by a standard rate of £255.

Types of vans that might be eligible for the lower tax rate could include electric, hybrid, hydrogen or gas powered models.

Excise duty

Further discount could be offered based on the number of zero-tailpipe emission miles a van can achieve, while vans with zero tailpipe emissions — such as battery electric or hydrogen models — would avoid VED altogether.

According to the Treasury, around 75% of vans purchased in 2016-2017 emitted over 150g/km of CO2, while only 0.4% of vans purchased that same year were ultra-low emission vehicles. As a result of the proposals, most van purchases would pay less tax in the first year, the Treasury claims.

However, according to the BVRLA and FSB, there are currently a lack of low emission vans available to the market that are available at a similar cost to their Euro VI diesel equivalents — a fact that would ultimately cost small businesses which typically have less capital to invest in new vehicles.

The organisations haves suggested the government should incentivise manufacturers to produce a more affordable range of greener vans across all vehicle weight ranges, by offering greater cash incentives to produce the vehicles.

Plug-in vans would be eligible to pay a lower rate of Van VED under the proposals consulted on by the government

Commenting on the consultation, BVRLA chief executive Gerry Keaney, said: “BVRLA members are keen to embrace lower emission vehicles and want to play a part in improving the UK’s air quality.

“The government’s approach will have the unintended consequence of penalising hard-working businesses. By heavily focusing on leveraging taxation the government is missing a trick to incentivise the much-needed production of a greater number of affordable, low emission vans. Van users in the UK currently don’t have much choice across all weight ranges.

“By allowing older, more polluting vans to continue to be taxed at a lower rate than newer, more efficient diesel vans the Government is sending the wrong signal and is failing to reward those making cleaner choices.”

Businesses

According to FSB policy chairman Martin McTague around two thirds of the organisation’s small business members rely on vans for transport and deliveries.

“Without these vehicles, they cannot provide their vital services throughout the UK, including those operating in busy town centres,” he added. “Small businesses are keen to play their part in improving air quality, but they continue to face barriers to adopting new, cleaner forms of transport, including the high cost of replacement vehicles and lack of charging infrastructure.”

Following the conclusion of its consultation on the changes to the Van VED at the end of June, the Treasury is expected to outline its full proposals in the autumn.