Legal Battle Launched to Protect Motability Scheme from New Tax Measures

For many disabled people across the UK, the Motability scheme is more than just a car – it's a lifeline to independence, enabling access to essential medical appointments, work, education, and social connections. However, new tax measures announced last November by Chancellor Rachel Reeves are now threatening this vital support, leading to a significant legal challenge.

The Heart of the Challenge: New Taxes and Their Impact

Charlie Proctor, a disabled Motability customer from Dorset, has initiated legal action against the Treasury, arguing that the new tax changes are unlawful and will disproportionately harm disabled individuals. His 'pre-action protocol letter' warns that these measures risk excluding those who rely on their Motability vehicles the most.

So, what exactly are these changes?

VAT Imposed: A 20% VAT will now be applied to most advance payments for cars leased through the scheme.
Insurance Premium Tax (IPT) Exemption Removed: The current 12% IPT exemption has been scrapped.
Limited Exemptions: Only vehicles with substantial adaptations for wheelchair and stretcher users will be exempt from these new taxes.

These taxes are set to be imposed on all new leases from July and are expected to generate £355 million annually by 2030-31 for the Treasury. Motability Operations estimates the changes will add around £300 million a year to the scheme's running costs by the end of the decade.

Motability's Response: Mileage Cuts and Increased Charges

In response to these increased costs, Motability Operations has introduced significant changes to the scheme itself, which will affect new orders placed after 1st July:

Halved Mileage Allowance: For most customers, the annual mileage allowance will be cut from 20,000 miles to just 10,000 miles.
Increased Excess Mileage Charges: If you exceed the new allowance, the charge will jump from 5p per mile to a hefty 25p (or 21p for those with wheelchair-accessible vehicles who don't pay VAT on additional payments).

Motability Operations states these measures are designed to reduce the average cost increase per lease from an estimated £1,100 to around £400 over three years. However, for many, even this reduced increase, coupled with mileage restrictions, will make the scheme unaffordable.

Who Will Be Most Affected?

Charlie Proctor's legal challenge highlights that these changes will hit those needing 'significantly higher mileage than average' due to disability-related needs. This includes a wide range of individuals:

Those requiring regular medical treatment.
Carers who rely on their vehicle to support others.
Parents transporting disabled children.
Disabled people living in rural or isolated locations, where public transport options are often limited or non-existent.

The evidence gathered by Proctor from customers across the UK, including those in rural areas and Northern Ireland, shows a 'clear pattern of impact which appears not to have been properly considered' by the Treasury.

The 'Drive Smart' System: A Further Concern

Adding to these concerns is the expansion of Motability's 'Drive Smart' monitoring system, which tracks the driving behaviour of many new lease customers. Proctor argues that this system 'may not reflect the realities of disability-related travel' and risks penalising users whose driving patterns are a direct result of their disability-related needs, further reinforcing the exclusionary effect of the policy.

Legal Grounds: Breach of Equality Duty and Discrimination

Proctor's legal letter asserts that the Treasury has breached its public sector equality duty under the Equality Act. He argues that the government failed to take 'reasonable steps to inform itself of the impact of its decision on disabled persons requiring higher-than-average mileage.' Furthermore, he claims the Treasury is guilty of indirect discrimination by placing disabled people who need higher mileage at a particular disadvantage.

He also contends that the government's policy is 'irrational' as it 'undermines the purpose of the scheme by disproportionately affecting those most dependent upon it,' failing to consider the essential nature of their travel.

What Happens Next?

Charlie Proctor is calling on the Treasury to reconsider its policy, produce a 'lawful and adequate equality assessment,' and take steps to avoid excluding disabled people who need higher mileage. If his concerns are not resolved, he intends to seek a high court judicial review of the tax changes. He has also launched a crowdfunding bid to cover his legal costs, stating, 'You cannot design a system for disabled people that excludes the people who need it most. This is a fight not just for me, but for thousands of people who are about to be pushed out of a system that was supposed to support them.'

The Treasury has acknowledged receipt of Proctor's letter but declined to comment on potential litigation. Motability Operations also stated it is aware of the correspondence, reiterating that tax policy decisions are a matter for the government and its role is to deliver the scheme.