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VED relief for zero-emission taxis

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The Vehicle Excise Duty (Taxi Capable of Zero Emissions) Regulations, SI 2019/1071, provide the definition of ‘taxi capable of zero emissions’ for the purposes of the exemption from the vehicle excise duty supplement for cars with a list price of over £40,000, which applies with effect from 1 April 2019.

A ‘taxi capable of zero emissions’ is a vehicle qualifying for plug-in taxi grant as set out in the department of transport guidance document Plug-in taxi grant vehicle application form and guidance notes, or as specified in a list maintained by the secretary of state for transport.

The government announced the change at Autumn Budget 2017 and introduced primary legislation in Finance Act 2019. The regulations come into force on 29 July 2019.

HM Treasury has also published the outcomes of its consultation launched at Budget 2018 on the impact of the ‘worldwide harmonised light-vehicles test procedure’ (WLTP) on the vehicle excise duty (VED) and company car tax systems. Alongside a summary of responses, the government has set out its key decisions as follows:

  • for cars first registered from 6 April 2020, most company car tax rates will be reduced by 2% in 2020/21 before returning to planned rates over the following two years – increasing by 1% in 2021/22 and 1% in 2022/23;
  • to accelerate the shift to zero emission cars, all zero emission models will pay no company car tax in 2020/21, 1% in 2021/22 before returning to the planned 2% rate in 2022/23; and
  • on vehicle excise duty, a call for evidence will be published later this year seeking views on moving towards a more dynamic system which recognises smaller differences in CO2 emissions.

The government confirmed at Budget 2018 that for cars registered prior to 6 April 2020, HMRC will continue to use the current new European driving cycle (NEDC) test procedure for company car tax purposes. Similarly, cars first registered prior to 1 April 2020 will maintain their current VED treatment.


Issue: 1451
Categories: News