The future of road charging should be tackled by the chancellor in March’s Budget, giving businesses time to prepare for any changes.

The VR said putting the issue on the agenda now would give businesses time to prepare

The call comes from the Vehicle Remarketing Association (VRA), which is also urging for Budget clarity on changes to VAT around compensation payments and strategic support for the UK motor industry as it says all three issues are likely to impact on the remarketing sector either in the short, medium or longer term.

Following reports last year that plans are being mulled by the chancellor on road user charging, Philip Nothard, chair at the VRA, said putting the issue on the agenda now would give businesses time to prepare.

“Currently, the Government is using several fiscal tools, notably very low Benefit-in-Kind company car taxation, to boost demand for EVs. However, over time, this will lead to a fiscal shortfall that will eventually need to be recovered somewhere.

“Several solutions are being discussed across the transport and motor industries, and the one that seems to be gaining the most traction is some form of road charging. It would be a positive step for the chancellor to announce some kind of consultation on this, we believe, allowing time for widespread debate to take place and for businesses in remarketing and elsewhere to prepare for whatever form of taxation the Government chooses for the future.”

Nothard added that the VRA would also like to see the Government take steps to look at the strategic future of the UK motor industry.

He highlighted how motor manufacturers and their supply chains are clearly facing both short- and long-term problems due to the pandemic and Brexit, while also needing to support the viability of EV production in the UK well ahead of the Government’s 2030 electrification target.

“We’d like to see an indication from the chancellor that he recognises the importance of the motor industry to manufacturing in the UK, and that the Government has a comprehensive strategy to fully support the fundamental changes that need to happen. In motor manufacturing terms, the end of the decade is simply not that far away.”

And Jonathan Butler, VRA board member, and partner and head of automotive at legal specialists Geldards, explained that new changes being proposed by HMRC would mean that any measures classed as compensation payments could become subject to VAT in the future including penalty clauses, early termination charges and more.

From the remarketing sector’s perspective, this would apply to instances such as when damages are applied to vehicles that are inspected and collected at the end of lease contracts; currently, these are zero-rated.

“Our feeling is that this would add cost in a sector where businesses are already under pressure and appears to be a relatively superfluous change. While it is arguably not a major addition to overall costs, it simply seems unnecessary at this point in time and we would like to see the chancellor dismiss it as an idea.”