Farm Ireland

Tuesday 12 December 2017

Taxing questions... how much road tax should people pay?

Land Rover Discovery
Land Rover Discovery

A change in tax regulations means that five-seater jeeps have become become hugely popular because owners get a versatile 4x4 without having to fork out thousands.

But while the price has plummeted as a result, there remains a grey area over how much road tax some owners should pay.

The sums involved can range from the €333 being levied by some local authorities to as much as €1,809 with others - all for the same vehicle.

In the main we are talking about large five-seater 4x4 commercials which have benefitted from the new regulations that knock €10,000 to €15,000 off the price of a more traditional seven-seater 4WD passenger vehicle.

So long as they meet strict criteria within the cabin and cargo areas, they qualify for the more benign VRT treatment.

The big names in the arena include the Land Rover Discovery, Mitsubishi Pajero, Toyota Land Cruiser and SsangYong Rexton.

With them you get a mix of the traditional commercial workhorse and luxurious five-seat family-car at the much lower 13.3pc VRT level.

Dozens of people have contacted the Farming Independent with queries over just how much road tax they should be paying since we ran an article on the five-seaters last year.

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It is emerging that some councils are charging a lot more than the €333 road tax.

That is because they believe individual vehicles will be used to carry family/private passengers as well as being driven as part of the owner's business.

Constant questions that arise include:

Who is entitled to the €333 road tax concession?

Do they have to be registered for VAT?

If someone avails of the concession can they ever carry passengers?

If they can't what is the point of having five seats?

Is it true that people caught with passengers can be prosecuted, or made to pay the full VRT and tax?

What happens if someone is VAT registered and declares they will use the vehicle for business and family purposes? Do they lose the concession or can they still claim the €333?

The Farming Independent has put these questions to the Department of the Environment.

A spokesman gave us a step-by-step outline of the position.

The department says that VRT is charged by the Revenue Commissioners on the basis of the 'construction' of a vehicle.

However, just because you pay a lower commercial rate VRT it does not necessarily mean your road tax will be at the €333 level.

That is because motor tax is based on both the construction and the use of a vehicle. The word 'use' here is critical.

It means that for a vehicle to be taxed as a commercial it has to be used "solely in the course of trade or business".

Crucially, the department says, a vehicle used for ferrying passengers "in a manner that would attract a higher rate of duty" must incur a higher road-tax bill.

And that, the department concludes, would "generally be the case with a five-seater being used privately".

In the case of some large 'five-seater commercials' the road tax on the passenger versions could be as much as €1,809 instead of €333. The department says that motor tax on post-2008 'commercial vehicles' is charged on the basis of engine capacity.

Despite the fact that these vehicles can carry up to four passengers, their original designation as a commercial vehicle seems to mean they are assessed on engine size.

On the ground, the fact is that some councils are accepting that the five-seaters are being used for commercial purposes only and charging €333.

But some are not. And that is where confusion and annoyance are springing up.

The department says it is up to the motor tax office to "seek documentation supporting a claim for the goods rate of motor tax".

A crucial line from the department is that "passengers can be carried in a goods vehicle if they are employees of the trader and are being carried in the course of their employment".

However, where a vehicle is being used "in a manner that is liable to a higher rate of duty" such as carrying passengers other than employees, the person could be guilty of an offence and liable for an excise penalty of €1,270 if not paying the higher road tax.

This effectively means that the vehicle cannot under any circumstances be used for social, domestic or pleasure purposes on €333 road tax, the department indicates.

So potential buyers need to be clear on that whole area.

The advice is to check in advance and be absolutely certain on what you are liable for.


Eddie Cunningham looks at the burning issue of what road tax should be paid on five-seater commercials

Indo Farming