Closing of loophole puts brakes on motorists claiming cheaper tax rate

BACKGROUND:Requirement will stop private users from registering vehicles for commercial purposes

PRIVATE MOTORISTS seeking reduced-rate “commercial” status for their cars are likely to be the losers under a change circulated by the Department of the Environment. According to the department, which issued new guidance on August 10th, motorists seeking the cheaper rates will have to produce their Revenue registration identity number to confirm they had a business registered for tax purposes.

While the requirement changes nothing for commercial users of adapted cars and vans, private users who have sought to adapt their vehicles and claim a commercial rate of tax will now find it more difficult.

The move was aimed primarily at owners of large four-wheel drive vehicles whom the department believed were reregistering their cars as commercial vehicles to beat increasing rates of road tax for private four-by-fours.

In 2008 the National Vehicle Driver File in Shannon recorded 2,058 applications from vehicle owners for a change of class from private to commercial. In 2009, this rose to 2,345 and, based on current figures, is set to increase again this year. The new circular from the department commented: “It has come to our attention that an increasing number of vehicles have changed their tax class from private to adapted goods.”

The circular said the Form RF 111A “has been revised and is attached”. It explained the form “now requires an applicant who is applying for a vehicle to be taxed at the goods rate to provide a Revenue registration identity number to confirm that he or she has a business registered for tax purposes”.

The applicant must declare the vehicle will not be used “at any time” for social, domestic or leisure purposes. The circular said “all applicants should be asked to complete this form and be made aware that if the vehicle is used in any private capacity it must be taxed at the private rate”.

The circular also reiterated previous requirements that applicants be asked for supporting documents including but “not limited to” evidence of registration for VAT; a tax clearance certificate; a commercial insurance certificate and a copy of their notice of tax registration form.

The department had evidence that large numbers of BMW X5s, Ford Mavericks and VW Touaregs were put forward for reclassification.

A spokesman for the Minister insisted yesterday that this was not a change in the taxation rules, but a requirement for supporting proof of an applicants commercial status. It would not affect legitimate tradespeople, but could prevent private citizens from declaring their vehicles were used for commercial purposes.

Every time there is a change in motor tax rates, usually in the annual budget, there is a new Act which inserts a new schedule of charges into Finance (Excise Duties)(Vehicles) Act 1952 .

It noted further legal basis for the requirement was in Article 3 of the Road Vehicles (Registration and Licensing) (Amendment) Regulations 1992, under which the authorities must be satisfied the vehicle is correctly taxed.