Changes to van duty and red diesel to cut pollution
The Treasury has launched two consultations on changes to vehicle excise duty for vans and the reduced duty rate for red diesel, in the light of government initiatives to clamp down on pollution in urban areas
15 May 2018
Less than one in every two hundred vans (0.4%) bought in 2016/17 was an ultra-low emission model. Therefore, the Treasury is seeking views on reforms to vehicle excise duty, currently charged at a flat rate of £250 for all vans, to make it more affordable to buy greener models.
A separate call for evidence is looking at whether the reduced duty rate for red diesel is holding back the use of cleaner fuels by non-road vehicles and machinery in towns and cities – for example cranes or generators used on construction sites. Red diesel, which accounts for 15% of all diesel consumption in the UK, currently benefits from a reduced rate of 11.14p per litre compared to the standard charge of 57.95p.
The call for evidence excludes red diesel used for agricultural purposes, fishing vessels, home-heating and other static generators.
Robert Jenrick, exchequer secretary to the Treasury, said: ‘We want to help “white van man” go green. We appreciate that buying a new van is a major investment for small businessmen and women and want to help make environmentally friendly choices more affordable.
‘Public health is at risk due to the use of red diesel in towns and cities. So we are looking at how we can level the playing field on red diesel and exploring how we can encourage users to ditch it.’
The consultation on vehicle excise duty for vans explores creating a graduated first year rate for vans, as is already in place for cars, using CO² banding. Most van purchases would pay less tax in the first year as a result of the change, and the Treasury says the move would encourage drivers to choose cleaner vans when purchasing a new van.
The Treasury says the reduced rate on red diesel costs around £2.4bn a year in revenue compared to if duty was charged at the main rate and the call for evidence is seeking information on whether this tax relief discourages the use of cleaner alternatives by non-road vehicles and machinery.
The government invites evidence on red diesel to explore the quantities used across different sectors, the value of the fuel duty rebate to those industries which benefit, the reasons for red diesel use and the cleaner alternatives that currently or will soon exist.
The consultation on vehicle excise duty for vans closes on 20 July, and the call for evidence on red diesel on 24 July.
Open consultation Vehicle Excise Duty for vans issued 15 May 2018
Report by Pat Sweet