Vehicle Tax Disc – Revenues Plummet

In the 6 months after the vehicle tax disc was scrapped the amount of vehicle tax collected in the UK fell by more than £200m figures have shown.

The paper tax disc that was first issued in 1921 was replaced in October 2014 by the online system in an overhaul that cost £1m and that critics warned would lead to confusion among motorists.

The latest figures obtained by the Financial Times in an Freedom of Information request, show that the DVLA  Driver and Vehicle Licensing Agency saw an immediate drop in its revenue following the changes, The National Audit Office had claimed there would be no ‘material increase in lost revenue’ as a result.

Between October 2014 and March 2015 some £2.7bn was collected in Vehicle Excise Duty. This was £223m lower than the amount collected between October and March a year earlier. In contrast the £3.2bn collected between April and September 2014 was flat compared to a year earlier.

Figures from the DVLA for the 12 months to March 2016 are expected to be published after the UK’s EU referendum which took place on June 23rd 2016. This will give a full picture of the 12 months following the change, as well as an insight into the period from October 2015 – when motorists did not have the tax disc in their windscreens to remind them of the renewal date.

According to its latest report, the changes cost the DVLA £1m which was mostly spent on IT.

The DVLA uses a debt collection agency, Marston Holdings, to claw back lost payments. According to the company’s most recent accounts, pre-tax profits more than doubled from £5.8m to £13.6m in the 12 months to the end of May 2015. Revenue for the business which also counts the HMRC, Transport for London and local authorities among its clients rose from £58.5m to £84.4m through both acquisitions and organic growth. Income from distress warrant enforcement – when bailiffs are sent to a property  – rose from £49.7m to £77.5m. The company did not show how much of its income comes from the DVLA and did not respond to calls or email for comment.

The DfT had estimated that £80m of vehicle tax revenue would be lost in 2015 – much higher than the £30m it had forecast for 2013. Its estimates are drawn from roadside analysis of untaxed vehicles and produced every 2 years. After a survey of 256 sites the department estimated in November 2015 that 1.5% of cars on the road were untaxed. This was s harp increase in the 0.6% figure for 2013, which it said was ‘probably due to major changes to the vehicle licensing system, which took place in October 2014’. As well as abolishing the physical tax disc, a requirement was brought in to tax vehicles when buying them, rather than rolling over to the previous owner’s vehicle tax.

Oliver Morley, DVLA chief executive, said “Almost 99% of all vehicles on the road are correctly taxed: that’s around £6bn in vehicle tax passed to the Treasury every year. We writ to every registered vehicle keeper in the UK to remind them when their tax is due and we have introduced a range of measures to make vehicle tax easy to pay, such as direct debit or online. At the same time we are taking action against those who are determined to break the law.


from the “Financial Times website June”

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