The government’s Budget should be used as an opportunity to re-examine the impact of Vehicle Excise Duty (VED) on rental companies that keep new vehicles for less than a year, says Meridian Vehicle Solutions.
Phil Jerome, managing director at Meridian, said that the current inability to obtain a full refund on any outstanding balance from the first VED payment at registration could add hundreds of pounds per vehicle to running costs.
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He explained: “The refund received is based on whichever is the lower of the initial registration payment or the rate for the standard, ongoing charge. The latter is usually much lower than the first, so there is often a substantial disparity.
“There appears to be no particular reasoning behind this rule and it effectively adds an additional VED levy on rental companies like ourselves, as well as franchised dealer groups and car manufacturers, that keep most of their cars for less than 12 months.
“We don’t believe that this is in any way an intentional move but was introduced alongside the current VED regime and has certainly had an impact on the costs that we and the rest of the rental industry face.
“It seems to us that it would be fairer to introduce a VED refund scheme that simply returned everything that had been paid on a pro rata basis – and this is something that the industry should be urging the new Chancellor to review.”
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By GlobalDataJerome added that the soon-to-be-introduced use of WLTP for calculations of VED as well as a range of general increases would see a substantial upwards movement in costs for rental companies, anyway.
“Generally, it looks as though costs will rise by around 20% on a typical annual charge. However, there are also very big individual jumps. For example, some new cars will cost as much as £960 more to register after 1 April. These are big increases.”
Jerome added that, while government environmental justifications for higher VED should be respected, the argument should also be made that the rental sector was an important part of the motor industry and one that played an important part in the health of UK PLC.
“Rental businesses not only satisfy an important need for flexible business and personal transport, we also deliver a steady flow of vehicles into the used sector that meet the latest environmental standards. The value of this should be recognised.
“Certainly, we’d like to see the Chancellor at least take a look at the first year VED hit that we are taking and provide some kind of explanation of their thinking.”
