RAC Cars News


Government Making Millions From Double Car Tax Windfall

By raccars Published

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New VED rules introduced with the abolishment of the paper tax disc are costing UK car owners millions and providing a windfall for the Government, according to motoring organisations.

In October 2014, the paper tax disc was made obsolete in favour of a new electronic system, bringing with it various new rules. According to the new legislation, when selling a used car the remaining VED cannot be passed on to the new owner with the vehicle. Instead, the previous owner is refunded for any remaining full months of tax paid and the new owner is obliged to buy new tax. However as the DVLA works in full month periods only, this means that the month in which the changeover takes place is effectively paid for twice - once by the seller and again by the buyer.

This scheme means that a car owner who sells on the second day of the month still has to pay tax for the full month, as does the buyer. Similarly, if buying a car on the 30th of the month, the seller will not be refunded for the last day or two but the buyer will have to tax the car from the first day of that same month.

The DVLA claims that it is not making any extra money out of this process and that it is, in fact, refunding more tax now than previously. According to its figures, the Government agency claims that it refunded £120 million in tax to car owners from October 2015 to January 2015, more than twice the amount refunded for the same period in the previous year.

Motoring organisations are also concerned that there has been a dramatic rise in cars being clamped on the basis that they are untaxed, since the introduction of the new system. Apparently, car owners are confused by the new rules, with many unaware that VED can no longer be transferred with the sale of a vehicle. The rules also apply to anyone transferring ownership of a vehicle, even if no money changes hands.

Vehicles which have been clamped for a failure to pay VED cost £100 to be released, which can only be done after the outstanding tax has been paid. Car owners are also obliged to pay £21 per day for storage of a vehicle, before it can be released, once conditions have been completed. If the car is not taxed and reclaimed within seven days, the DVLA is entitled to dispose of it.

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