DVLA misses out on £400m in tax after scrapping paper discs

Dept loses at least £80m due to fraud

The UK's Driver and Vehicle Licensing Agency (DVLA) collected £400m less in tax during the first 12 months of moving paper tax discs online, according to a Freedom of Information response.

From October 2014 to September 2015, the DVLA collected £5.71bn in vehicle excise duty, £412m lower than in the previous 12 months - according to the Financial Times [paywalled].

However, the head of the Driver and Vehicle Licensing Agency, Oliver Morley, told the Reg that it was wrong to suggest that revenue has been lost as a result of an increase in non-compliance.

He said: “It is not correct to compare the 2015/16 revenue with the previous year. This is because from 1 November 2014, customers could choose to spread their payments over 12 months with direct debit.

"Previously all vehicle tax would have been paid up front, which is why there is a difference in the monthly cash receipts year-on-year.”

Nevertheless, according to the DVLA’s 2015/16 accounts published last month, the department noted an increase in unlicensed traffic of 0.8 per cent to 1.4 per cent of all traffic compared with the previous year. The department's statisticians estimate a resulting loss to the Exchequer of around £80m, up from £35m in June 2013.

The report said: "Although it is not possible to draw a certain link, the increased evasion has coincided with the first full year of the significant changes to the collection procedures for Vehicle Excise Duty introduced in 2014/15 and these may have contributed to the reduced levels of income."

The department has said a move to online-only tax discs will save £10m in admin costs.

Last year the department undertook a major shake-up of its IT - ending a 13-year, £1.5bn contract with IBM and Fujitsu and bringing 300 IT folk in-house. By doing so the department expects to save £225m over the next decade.

According to the department’s accounts, ICT costs increased by £5m in 2015/16 to £125.7m. That increase was due to the transitioning from its previous contract.

In 2014/15 the agency implemented three major changes to the collection and enforcement of Vehicle Excise Duty: enabling motorists to pay by direct debit; abolishing the paper tax disc; and amending the law so that vehicle tax automatically ends when a vehicle changes ownership, rather than transferring with the vehicle.

Payments by DVLA to its debt collectors rose by 60 per cent to £618,900 in the 10 months following the removal of paper tax discs, compared with the 10 months before the scheme was introduced - according to the FT [paywalled]. ®