New Car Tax Rules See Surge In Evasion Rate

The rate of car tax avoidance has more than doubled, partly because some buyers of used cars do not realise new rules mean they have to tax the vehicle immediately.

Figures from the Department for Transport show that the rate of unlicensed vehicles in traffic increased to 1.4% in 2015 from 0.6% in 2013, the last time it carried out a survey.

It estimates 560,000 unlicensed vehicles are in use, meaning about £80m a year in vehicle excise duty revenue is lost – higher than in any year since at least 2007 – though some will have been recovered through enforcement action or owners paying arrears later.

New Car Tax Rules See Surge In Evasion RateThe department said that the increase was probably due to major changes in the vehicle licensing system which took place in October last year. The figures are the first published since then.

Those changes saw the requirement for cars to display a valid tax disc scrapped, with reminders of when tax is due instead sent out online and those paying by direct debit seeing their licenses automatically renewed.

But they also meant that any existing vehicle tax now automatically ends when a vehicle changes hands, with the seller automatically refunded any full months of remaining tax and the new owner required to pay tax on the car immediately.

In the past, any remaining tax could be transferred with the vehicle.

The DfT said: “There is therefore potential for evasion rates to increase if the new keeper fails to understand or comply with the new arrangements.

“However, this situation can only arise where a vehicle changes hands, and the DVLA have been issuing reminders to all new keepers who have not taxed their vehicle.”

DVLA chief executive Oliver Morley said: “Almost 99% of all vehicles on the road are correctly taxed: that’s around £6 billion in vehicle tax passed to the Treasury every year.

“We write to every registered vehicle keeper in the UK to remind them when their tax is due and we have introduced a range of measures to make vehicle tax easy to pay. At the same time we are taking action against those who are determined to break the law.”