Car tax when you buy/sell a car

‘Ghost’ car tax pulls in £38 million Government windfall

‘Ghost’ car tax pulls in £38 million Government windfall

‘Ghost’ car tax pulls in £38 million Government windfall

Double-taxing cars for the month they change hands, because previous owners can only claim back full months of unused tax and a new owner must tax the vehicle immediately, is generating a £38 million* windfall for the Government, the AA estimates.

October’s abolition of the tax disc continues to haunt other car buyers who are unaware that the disc is now defunct. Many who, wrongly, believe that a disc on the windscreen still indicates transferable tax have been caught out when enforcers have caught up with them.

Paying twice

The AA has various case studies where the car was transferred from one member of the family to another but the family were shocked to find that the vehicle excise duty (VED) was not refunded for that month and yet the new owner had to purchase VED for the full month.

Hence the family were paying tax twice for the same month on what has become a ‘doppelganger’ vehicle..

Lack of awareness

Less than two months before the abolition, 42% of a sample of 18,000 AA members knew nothing about it. More than half (51%) didn’t know that unexpired tax can’t be passed on and 60% didn’t know about automatic cancellation of the tax disc. The AA had argued that the government should change the refund arrangements so that drivers didn’t lose out.

More clamping

This has contributed to a 71% increase in the number of cars clamped for being untaxed, up from 5,115 in February last year to 8,741 this February. In March, clampings were still running above 8,000 a month.

We are particularly disappointed that there was not an equally massive communications campaign to ensure the UK’s 35 million drivers got the message

Edmund King, AA president

Massive change after 90 years

“October’s abolition of the vehicle tax disc and a new process for transferring a vehicle’s ‘keeper’ is a massive change after 90 years of the old and familiar system.  We are particularly disappointed that there was not an equally massive communications campaign to ensure the UK’s 35 million drivers got the message,” says Edmund King, the AA’s president.

Double tax

“UK drivers now pay ‘double tax’ for the month that a vehicle changes hands and the DVLA’s clampers are now netting 3,000 more untaxed cars a month than this time last year.  It is right that those who deliberately evade paying vehicle tax are caught and punished. But, it is a very harsh lesson for those who may not be aware a tax disc is now automatically cancelled when a vehicle changes keepership.

The DVLA must adopt a cautious and more flexible approach to enforcement during this transition

Edmund King, AA president

Outrage

“AA members have contacted us expressing outrage that their apparently taxed car was not taxed despite it having a valid disc on display.  The DVLA must adopt a cautious and more flexible approach to enforcement during this transition.  An AA-Populus poll, carried out just before the new rules started, showed millions of drivers were unaware that a tax disc is automatically cancelled when it changes hands”.


(4 May 2015)

*Latest available data from British Car Auctions shows 4.07m used cars changed hands via dealers in 2012 and 2.73m did so privately. Under the new system all would have their tax disc cancelled – DVLA estimates that only 30% of cars traded into dealers have any tax left eligible for a refund and the AA estimates conservatively that 50% of cars transferred privately do. Because only complete months can be refunded by DVLA there will be a financial loss to the previous keeper.

The average CO2 car tax band is Band G according to DVLA statistics and one month’s value of that is currently £15. So 50% of private sales lost car tax would apply to 1.36m vehicles amounts to £20.4m. For dealer transfers 30% of 4.07m vehicles equates to 1.22m vehicles which equates to £18.3m. Total is £38.7m p.a.

This is a conservative estimate and takes no account of the potential loss to a new keeper of having to tax from the first of the month, or impact on HGV/LGV sales/ transfers.