What happens when a vehicle loses its export exemption from vehicle excise duty under section 18 of the Vehicle Excise and Registration Act 1994?

When an export vehicle exemption under Schedule 2 paragraph 23 is breached, the exemption is removed retrospectively. The vehicle is treated as if it was never exempt, and vehicle excise duty becomes payable for the entire period the vehicle was on the road without a licence. The original purchaser or current keeper becomes liable depending on who holds the vehicle.

Who is liable for backdated vehicle excise duty when the export exemption is lost?

If the person who originally purchased the vehicle from the manufacturer still keeps it, they owe duty for the full period since first registration. If a subsequent keeper now holds the vehicle, that current keeper is liable for duty from the date they first started keeping it. Each keeper is responsible for their own period of possession.

Can the Secretary of State waive backdated vehicle excise duty under section 18?

Yes, the Secretary of State has discretion to waive all or part of the vehicle excise duty that becomes payable when an export exemption is lost. This power provides flexibility where strict enforcement would be disproportionate, for example where the failure to export was caused by circumstances beyond the keeper's control.

How does section 18 interact with section 30 penalties for keeping an unlicensed vehicle?

To prevent double charging, any amount already ordered to be paid under the section 30 penalty regime for keeping an unlicensed vehicle is deducted from the duty owed under section 18 for the same period. The total liability is not duplicated, but both provisions can apply to different portions of the relevant period.

Vehicle Excise and Registration Act 1994 section 18

Vehicles for export becoming liable to VAT

Section 18 deals with what happens when a vehicle originally exempt from vehicle excise duty as an export vehicle loses that exemption, and who becomes liable to pay the duty that was not previously charged.

Vehicles initially exempt from duty as export vehicles can lose that exemption retrospectively if the conditions of Schedule 2 paragraph 23 are breached, meaning they are treated as never having been exempt.
When exemption is lost, the person who originally bought the vehicle from the manufacturer owes duty for the entire period since the vehicle was first registered, or any subsequent keeper owes duty for the period since they first kept the vehicle.
The Secretary of State has discretion to waive all or part of the duty that becomes payable in these circumstances.
Any amounts already ordered to be paid under the separate penalty provisions for keeping an unlicensed vehicle (section 30) are offset against the duty owed, so the same person is not charged twice for the same period.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member