U.K. Car-Rental Lobby Opposes Planned Tax Increase

The U.K. car-rental industry faces a £30.8 million ($38.9 million) tax increase next year and the auto industry will lose 29,000 new-car sales annually if the government proceeds with plans to change the vehicle-excise-duty (VED) system, an industry group says.

The British Vehicle Rental and Leasing Assn. says the new tax system for cars registered after April 1 still will see the first-year tax linked to carbon-dioxide emissions, but in subsequent years the tax will be calculated based on the vehicle’s list price.

The BVRLA says rental companies have said if they operated similar fleets from next April, the changes would cost them £30.8 million in higher taxes.

Should this happen, the companies say they will operate their fleets longer. Data supplied to the industry group by rental companies suggests this will result in more than 29,000 fewer new-car purchases by car-rental firms next year.

BVRLA CEO Gerry Keaney says rental companies account for a substantial proportion of new-car purchases in the U.K.

“If these reforms go through, the government will seriously damage its green agenda and its air-quality goals,” Keaney says in a statement.

“Many of these cars are ultra-low-emission vehicles, and by introducing these VED reforms, the government will be adversely hampering its overall goal to drive the take-up of clean vehicles and improve road safety.”

The trade group says the VED changes also will reduce the availability of these nearly new cars in the secondhand marketplace, making it more difficult for motorists to find affordable low-emissions cars.

Keaney says the proposed changes also will prevent the industry from claiming £1.7 million ($2.1 million) a year in refunds. Car-rental companies operate the newest vehicles on U.K. roads, with the average rental car just eight months old.

But from next April, they will not be allowed to reclaim the full first-year rate of tax on any vehicle they dispose of which emits more than 110 g/km of CO2.

“We are calling for these complex refund rules to be removed so that anybody selling their car is fairly entitled to claim back the full amount of unused tax owed to them,” Keaney says.