End of paper tax disc sees £200m hike in evasion

Switching from a paper tax disc to an online system for collecting Vehicle Excise Duty (VED) has prompted a fall of over £200m in the amount of tax collected by the Driver and Vehicle Licensing Agency (DVLA) in the first six months of operation, new figures suggest

The change took pace in October 2014, and from that period up till March 2015 the agency recorded £2.7bn in car tax revenues, £223m below the amount collected between October and March a year earlier, according to figures obtained by the Financial Times under a Freedom of Information request. In contrast, previous years saw revenues remain largely flat over the six months.

In the most recent of its regular Roadside Surveys on VED, conducted every two years, the DVLA reported that overall VED evasion rates are rising. In June 2015, the rate of unlicensed vehicles in the UK was estimated to be 1.4%, compared with 0.6% in 2013, sizeable increase over the period assessed.

This amounts to some £80m in lost tax revenue over a full year, although the DVLA forecasts that it would be able to recover around £38m through enforcement activity or through vehicle keepers paying arrears of duty to cover the untaxed period.

The agency also said steps have been taken to look at why evasion levels have increased, and has agreed that by September 2016, it will have developed and agreed a strategy with the Treasury and Department for Transport to reduce VED evasion.

Unlike the old system whereby all taxed vehicles had to display a paper tax disc, under the new scheme, automatic vehicle number plate recognition technology is used to check that a car has been taxed, while payments are handled online. There is no paper record of payment.

In the DVLA annual report for 2014/15, the National Audit Office (NAO), which oversees the accounts, said it had reviewed the systems and processes in place to support the changes and ‘has not identified any significant additional risk to the ultimate collection of VED'.

The NAO went on to state: ‘The abolition of the paper tax disc has likely contributed to an initial increase in reporting levels of non-payment which had led to additional compliance and enforcement activity by the agency.’

The DVLA recorded VED of £6.1bn for 2014/15. Its next annual report is due out shortly, and is likely to appear after the European referendum is over and government business resumes.

In its business plan for 2016/17, the agency noted that ‘almost 99%’ of vehicles on the road are currently taxed.

DVLA annual report and accounts 2014 to 2015 is here

DVLA business plan 2016 to 2017 is here

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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