Tax offset on Ulez clean air fees is ‘shot in arm’ for London white van man

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Businessmen driving polluting vehicles can offset tax charges in London’s controversial ever-expanding Low Emissions Zone, a major loophole in Mayor Sadiq Khan’s flagship clean air plan.

The ultra-low emission zone will be extended across greater London from Tuesday, a move that has drawn a backlash from drivers in some of the city’s outer neighbourhoods. The policy has been blamed for Labor’s failure to win the Uxbridge by-election last month.

Motorists driving a vehicle that does not meet emission standards must pay a daily fee of £12.50 to drive into Ulez. The fee generally applies to gasoline engine vehicles manufactured before 2006 and diesel engine vehicles manufactured before 2016, and includes people driving into the area for work.

But the Greater London Authority told the FT that self-employed people could claim the cost back in their tax returns if the trip was “a purely business trip”.

Despite being backed by a scrapping scheme, the loophole will come as a relief to thousands of traders who fear they will have to spend huge sums to replace their vehicles.

HMRC said: “Customers who self-assess are entitled to tax relief for travel expenses, including low emission zone charges, if these are fully and exclusively used for trade purposes.”

HMRC said employees were also entitled to tax relief if they drove as part of their job, although this did not include commuting.

Ulez was first introduced in central London by then Conservative mayor Boris Johnson to tackle air pollution, but was later expanded by current Labor mayor Khan to cover a wider area of ​​the city, extending to the north-south ring road .

Khan insisted that fewer than one in 10 drivers would be affected by the scheme. But under pressure from Labor’s national leadership, he has recently expanded the scrapping scheme to provide grants for those looking to get rid of non-compliant vehicles.

Small business groups welcomed the news. “With tax revenues at a 75-year high, there’s little good news coming out of HMRC at the moment,” said Craig Beaumont, director of external affairs for the Federation of Small Businesses.

“However, this is a shot in the arm for the self-employed, whose businesses will take a hit from Ulez’s allegations from Tuesday.”

Beaumont added that tax experts have indicated to the group that the Ulez fee is a permissible business expense that is tax deductible if the trip is used “entirely and exclusively for trade purposes.”

But the loophole could lead to fewer drivers switching cars for cleaner alternatives. It also raises the question of whether taxpayers far from London will partly subsidize drivers in one of the wealthiest parts of the country.

Ben Spencer, the Conservative MP for the constituency of Runnymede and Weybridge in northern Surrey, said Ulez’s extension “wouldn’t stand up to scrutiny”.

“It would be completely wrong to expect people who never voted for the mayor of London to pay for his plans,” he said.

Khan insisted that Ulez’s expansion “will be a landmark day for our city” and will help ensure that every Londoner breathes cleaner air.

“Expanding the area was a very difficult decision, but with toxic air causing about 4,000 premature deaths a year and our children growing up with stunted lungs, it was the right decision,” he said.

A number of business leaders wrote to Prime Minister Rishi Sunak last week in support of the Ulez expansion, calling on him to “support local initiatives to achieve a clean economy, such as the Mayor of London’s Ulez expansion, and the achieve net zero emissions by 2030”.

The letter was signed by industry group BusinessLDN chief executive John Dickie, Volta Trucks chief executive Essa Al-Saleh and Addison Lee sustainability director Andrew Way Scott (Andrew Westcott).

They wrote: “Those leaders who tackle air pollution not only ensure better health for our workers, but also give us certain direction to enable us to invest in London.”

TfL said eight out of 10 lorries in outer London on an average day are Ulez compliant. In a 2022 consultation paper, transit agencies estimated that 42,000 trucks a day are not meeting their requirements.

Transport for London said the introduction of the Ulez zone in central London and the inner city was a success, pointing to data showing nitrogen dioxide concentrations were estimated to be 46% lower than in central London without the zone and higher than in central London without the zone. Central London was 21% lower. House prices in central London are 1% lower.