Exemption from Vehicle Excise Duty for Ukrainian vehicles
Published 18 July 2023
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Who is likely to be affected
Individuals in the UK under the Family, Sponsor and Extension Ukrainian visa schemes, in possession of a vehicle with Ukrainian number plates.
General description of the measure
This measure will enable the exemption of individuals in the UK under the Family, Sponsor and Extension Ukrainian visa schemes from the requirement to register and tax their vehicle with Ukrainian number plates in the UK for a period of 36 months. The measure will also provide the power for Government to create Vehicle Excise Duty (VED) exemptions for specified groups of foreign registered vehicles in certain circumstances.
Policy objective
It will enable secondary legislation to exempt individuals who are living in the UK under certain resettlement schemes, established in response to the Ukraine conflict, and who have brought a vehicle with Ukrainian number plates with them, from VED and registration for 36 months. This will ensure that individuals fleeing the war in Ukraine, who have not yet registered their vehicles in the UK, do not have to face these additional costs, while they are temporarily in the UK
Background to the measure
Around 178,000 Ukrainians have entered the UK since the beginning of Russia’s illegal, unprovoked invasion of Ukraine in February 2022.
The Department for Transport understands that a significant number of individuals who have entered the UK fleeing the conflict in Ukraine have brought vehicles with Ukrainian number plates with them. GOV.UK guidance for those entering the UK from Ukraine with a vehicle states that vehicles must be registered and taxed with the Driver and Vehicle Licensing Agency if the keeper becomes resident or stays longer than 6 months.
The existing 6-month period does not align with the duration of the various Ukrainian visa schemes introduced in response to the conflict. To address this, this measure will allow for a 36-month VED exemption to be made (in line with the length of the visa schemes).
Detailed proposal
Operative date
The 36-month VED exemption will apply from the date the individuals entered the UK.
The Government intends to legislate for this measure in the Finance Bill 2024 and bring forward secondary legislation, with retrospective effect.
Current law
The Vehicle Excise and Registration Act 1994 (VERA 1994) establishes a comprehensive regime for the imposition, collection, and enforcement of VED. Section 5 of VERA 1994 contains limited powers to make provision for certain descriptions of VED exempt vehicles; such powers would not be sufficient to create the exemptions provided for by this measure.
Proposed revisions
This measure amends VERA 1994 to insert a new regulation-making power into that Act. The power enables regulations to be made providing for VED exemptions for certain groups of foreign registered vehicles. The power allows for the VED exemptions to be retrospective, time limited, and subject to specified conditions.
Summary of impacts
Exchequer impact (£ million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible | negligible |
The final costing is expected to be negligible but will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
Economic impact
This measure will be formally assessed once costings have been certified by the Office for Budget Responsibility, but is not expected to have significant macroeconomic impacts.
Impact on individuals, households and families
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
The legislation will allow for VED exemptions to be made with respect to groups of foreign registered vehicles in certain cases. It therefore has the potential to affect certain specified groups of people who are living in the UK and are in possession of a foreign registered vehicle. In the first instance, it is intended to be used to make legislation to address a specific issue that has been identified in relation to individuals living temporarily in the UK under the Family, Sponsor and Extension Ukrainian visa schemes. Equality impacts will be assessed on a case-by-case basis prior to each specific exercise of the power.
Impact on business including civil society organisations
This measure is not expected to have an impact on businesses.
Operational impact (£ million) (HMRC or other)
There will be negligible financial impact on operational costs for the Driver and Vehicles Licensing Agency.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through regular communication with relevant departments and agencies across government.
Further advice
If you have any questions about this change, please contact the Energy & Transport Taxes team: [email protected].