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The government has been urged to revisit changes made to the Vehicle Excise Duty (VED) regime in the last Budget to encourage fleets to opt for lower CO2 vehicles.
According to medium-term rental company Meridian Vehicle Solutions, the new regime creates anomalies when it comes to low-emission vehicles.
Vehicles are subject to an annual charge of £140 unless they have zero emissions and all vehicles with a list price of more than £40,000 are subject to a £310 first-year surcharge.
Phil Jerome, managing director of Meridian, said the system was flawed as a driver of a 1.0-litre Ford Fiesta would be paying the same VED as someone who owns a 5.0-litre Mustang sports car. He added the £40,000 list price rule was "very odd" as someone running a Tesla Model S electric car would be required to pay £310 a year purely because it has a high list price ?despite it emitting nothing.
Jerome added that the old system - which took an annualised banded approach - worked well and encouraged fleets to reduce their CO2 outputs. He called on the government to overhaul the VED regime and structure it like the current company car benefit-in-kind (BIK) taxation arrangement, which has a gradual increase in payments over time and therefore pushes fleets to run lower-emitting vehicles.
Jerome also questioned why there's not a differentiation between petrol and diesel vehicles considering the furore currently being created in some circles. "Generally, if you are looking at a mainstream fuel, petrol produces better air quality outcomes but there is no differentiation between petrol and diesel under VED," he said.
Meridian's managing director concluded: "The only advantage of the new system is that it is simple. But it simply doesn't make much sense and it would be good to see the government revisit it at the autumn Budget."
Related content:
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VED update to hit rental firms with 400% tax hike, claims BVRLA
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