The BVRLA has highlighted a loophole in the VED system that could hit hire fleets and has called for chancellor Philip Hammond to review the planned changes to rules that are due to come into force in April 2017.

Cars with a list price under £40,000 that emit more than 100g/km of CO2 will not be eligible for a full pro-rata VED refund to the first year licence under the new system, which could result in increased costs for short-term rental companies. Instead cars will only be able to claim on the new £140 rate, even if the car is in a higher band and eligible for a higher rate of first-year tax.

The BVRLA highlights an example of a £26,350 Audi A4 emitting 145g/km that costs £200 to tax in the first year. If this was defleeted after six months then it would only be eligible for a refund of £58.33, rather than the pro rata refund of £83.33 – a loss of £25, which could prove expensive over a large fleet.

BVRLA chief executive Gerry Kearney has called for a review of the system, saying: “At a time when the UK economy and the automotive market require stability and reassurance from Government, HM Treasury should revise the refund rules so that when a vehicle is disposed of in the first year, the refund is based on the first year rate, not the standard rate.”