Chris Bond is head of motor retail and a business tax partner at accounting and consultancy firm, BDO. He explains his concerns about the forthcoming, mileage-based eVED tax system – and how it could slow the adoption of electric cars.
Charging for electric car mileage will be with us by 2029, thanks to the UK Government’s proposed new eVED system. How this will work is an important consideration for the automotive industry – and indeed for the British public.
While I support the principle of a mileage-based system, there are key issues of fairness, administration and user-confidence yet to be addressed in the proposals. To work properly, the final legislation will need to create a simple, transparent and cost-effective system that aligns with the real-world behaviour of drivers and car dealers.
I agree that a mileage-linked duty is logical. However, it may be seen as unfair because it disadvantages drivers of smaller cars, which damage the road less than heavy SUVs. A better option would be to have a tiered structure that reflects vehicle kerb weight.
Estimates ‘vulnerable to manipulation’
My major concern, though, is the government’s suggestion that motorists will have to estimate their annual mileage for the year ahead. Such a system would clearly be vulnerable to error and manipulation. Instead, in BDO’s response, we have recommended fees based on the previous year’s mileage as being clear, verifiable and easily understandable.
For new car owners with no historic mileage, national average assumptions might be used. These could then be corrected once verified personal mileage data becomes available.
Clearly, garages that perform MOTs and car servicing will become accredited mileage-check providers. Extending this reporting to service bookings for new electric cars (which aren’t due an MOT for the first three years) could be integrated into existing systems without much difficulty.
eVED technology needs to be proven
For the longer-term, technology-based solutions are the obvious answer. Data from EV charging points, smart-meter-style integrations and domestic charger apps could eventually support accurate monthly billing. However, the mandatory adoption of such solutions should only occur once the technology is proven, which is unlikely until the mid-2030s.
Until then, annual mileage verification by accredited providers will remain necessary. This will also provide confidence for drivers, as they can see a paper trail.
If the government is fixed on an estimated mileage approach, this will probably have to come with a differential pricing structure to discourage frequent under-estimation. For example, a higher rate could be applied to any additional miles if the final certified figure is more than 20 percent higher than the driver’s estimated mileage.
Also, to retain flexibility for life events that could alter driving habits (the car’s owner starting a new job, for instance) such a system should allow motorists to update their estimated mileage during the year. No doubt, HMRC will insist on some form of penalty regime to address misuse, yet this all seems rather like overkill compared to a previous-year mileage approach.
The problem of taxing leased vehicles
Regardless of which system is adopted, providing drivers with an online eVED account with the DVLA will be important to help them manage payments and other vehicle information efficiently.
For leasing businesses, variable eVED charges may introduce new complexities, particularly where the lessor currently pays the car tax. Annual mileage accreditation would require data sharing between motorists, leasing companies and the DVLA.
To mitigate these challenges, BDO has suggested fixed mileage charges for three years, based on annual mileage averages, for electric cars that are leased. Options such as mileage banding could also be explored for fairness.
I really hope the government doesn’t go down the in-year mileage estimation route. Unless the eVED charge, due in 2029, is simple to use and perceived as fair by all parties, it could hit future sales and leasing uptake for electric cars. And that would be a bad outcome for us all.
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