Disability and Carers Benefits Expert Advisory Group - Accessible Vehicles and Equipment (AVE) Scheme: advice

To: Ben Macpherson – Minister for Social Security and Local Government

By e-mail

16 December 2022

Dear Mr Macpherson,

Accessible Vehicles and Equipment Scheme: knowledge building session

We are grateful to your officials for discussing the Accessible Vehicles and Equipment Scheme (the AVE Scheme) with us on 13 October 2021. We covered a number of topics which the Group have since discussed and we have concluded it would be proper to provide proactive advice on the Scheme.

We welcome the commitment by the Scottish Government to ensure safe and secure delivery of the newly-devolved benefits, and to improve the claiming process for all recipients. We understand that our advice may incur risks, implications and challenges for the Scottish Government. These will be made explicit in this advice note and we aim to signpost a proposed solution.

Clearly, information and the current policy landscape may change in ways that cannot be foreseen at this time, so the advice we give now is with the caveat that this too may change in light of developments.

We set out below the key issues and recommendations arising from our discussions to which we wish to draw to your attention. Our recommendations are summarised at the end of this letter.

Providers

Key concern:

1. Lack of competition for providing the Scheme may limit choice and value for money for disabled clients.

We are pleased to hear that the new Accessible Vehicle and Equipment Scheme (the Scheme) will be open to any providers, and not just Motability, through an accreditation system in Scotland. However, the Group is concerned that at present there does not appear to be any other providers that would be able to meet the requirements to deliver the Scheme across the whole of Scotland. We would be keen to understand if this is the case, and if so, what are the Scottish Government’s proposals to enable other viable providers in this area, including any consideration of reviewing the accreditation scheme to ensure it enables multiple providers on a regional basis to support smaller providers in future?

Further, the Scheme only represents a small part of Motability Operations business. The Group are aware that the Scottish Government will have direct oversight of the management of the Scheme. Given the apparent lack of viable alternative providers in Scotland, we would welcome further details on Scottish Government’s views on how this oversight role can be exercised effectively.

Eligibility

Key concerns:

2. There may be limits to accessing the scheme for people with less than 12 months before a review of their disability assistance.

3. The waiting times for people meeting the Special Rules for Terminal Illness receiving their vehicle may be too long.

The Group understand the following in regards to eligibility for the Scheme:

• an individual can access the Scheme if they receive the enhanced rate of the mobility component for Adult Disability Payment or the higher rate of the mobility component for Child Disability Payment
• all those on Adult and Child Disability Payment have rolling awards and that in order to get a vehicle from the Scheme, individuals will need to have at least 12 months left before their next scheduled review or be on an indefinite award
• applications to the Scheme will still be considered if there are less than 12 months left before an individual’s next scheduled review
• individuals that meet the Special Rules for Terminal Illness are automatically awarded the highest mobility component for Child or Adult Disability Payment and that no scheduled reviews are set for these individuals
• although Child and Adult Disability Payment applications that meet the Special Rules for Terminal Illness will be fast tracked for processing by Social Security Scotland, waiting times for new vehicles for these clients remain the same as other clients due to the availability of vehicles at manufacture

Previous year estimates of vehicle waiting times and modelling could help to create a pool of vehicles held for fast-track release for clients that meet the Special Rules for Terminal Illness. We would welcome further information on the parameters on decision making for access to the Scheme for those with an upcoming scheduled review.

Tax exemptions, Short-Term Assistance and expanding the AVE Scheme

Key concerns:

4. People on Short-term Assistance not being able to remain on the Scheme whilst they challenge a decision.

5. Complexities in the tax system acting as a barrier to more people being able to access the Scheme. 

Our understanding is that at present cars leased via the Scheme are exempt from vehicle tax. This is not a feature of the Scheme - if you qualify for the enhanced rate of the mobility component of ADP or CDP, you are exempt from vehicle tax. Therefore, someone who gets the enhanced rate of mobility component and has their own privately owned car can also claim an exemption from vehicle tax. Since you need to be getting the enhanced rate of the mobility component of ADP or CDP to be eligible for the Scheme, this means all Scheme vehicles are exempt from vehicle tax. We are of the understanding that Motability Operations provision of the Scheme relies on the scale of their purchasing power for vehicles and insurance, on the zero-rating of VAT on cars leased (as well as being able to take advantage of other exemptions for the purposes of VAT and Insurance Premium Tax), and on the direct receipt of customers’ mobility allowance from the UK Government.

While an individual in receipt of the standard rate mobility component for Adult Disability Payment can get a 50% reduction in vehicle tax, the Group’s working assumption is that if the Scheme was extended in Scotland to those not on the enhanced rate of the mobility component of ADP or CDP, the requirement to pay all or partial vehicle tax would impact the way the Scheme currently works, unless the exemption to pay vehicle tax was also extended. This also causes an issue for anyone that is on the Scheme but is currently receiving Short-term Assistance while they challenge a decision to reduce or stop their enhanced mobility component. The Group also note there may be potential issues for extending the criteria for the enhanced rate of mobility, for example by changing the ’20m rule’. In all these circumstances, there may also be implications for the availability of other tax exemptions, such as for VAT and Insurance Premium tax that would need to be considered.

Potential solutions, should Scottish Ministers wish to extend the Scheme and ensure those in receipt of Short-term Assistance can remain within the Scheme, identified by the Group are:

1. the Scottish and UK Government should agree arrangements to extend exemptions to vehicle tax to those in receipt of Short-term Assistance and all those entitled to rates of mobility component that would enable that individual to access the Scheme, and ensure any exemptions to the Scheme did not impact on the VAT or other tax exemptions for vehicles leased under the Scheme, or

2. the Scottish and UK Government should agree arrangements to extend exemptions to vehicle tax to all cars in the Scheme, and ensure any exemptions to the Scheme did not impact the VAT or other tax exemptions for vehicles leased under the scheme, or

3. the Scottish Government could reimburse Scheme providers and individuals for any tax they would have to pay for cars leased through the scheme, or owned or leased privately (including vehicle tax, VAT and any related taxes now or in future), or

4. individuals are required to pay their own tax, either to the Scheme provider or directly if they own their own vehicle or have other leasing arrangements in place (including vehicle tax, VAT and any related taxes now or in future).

The first and second option would have the advantage of allowing the Scheme to continue operating on the same basis as at present. It is recognised that under the current Fiscal Framework arrangements, the Scottish Government may need to reimburse the UK Government for the costs of extending exemptions in Scotland where those exemptions are not available throughout the rest of the UK. It is also acknowledged that arrangements would need to be made to allow the DVLA to easily recognise and check the differing rules for Scottish disability assistance when checking whether an individual was liable for vehicle tax.

The disadvantage of the second option would be that individuals that own their own vehicle or lease it privately would still need to meet the costs of the vehicle tax or any other costs such as VAT unless alternative arrangements were made to reimburse these individuals. As with option 3, this could potentially be achieved by allowing individuals to apply for an additional payment as part of their Disability Assistance award to cover the vehicle tax or any other taxes relating to the purchase, lease or adaptation of the vehicle.

The third and fourth options would still enable those entitled to Short-Term Assistance to remain within the Scheme and for the Scheme to be extended, but would both add complexity to processes. The fourth also places the burden of costs onto individuals, but for those to whom access to the Scheme is extended there would likely still be an overall benefit.

The Group’s particular concern in the first instance is ensuring that those within the Scheme, but now in receipt of Short-Term Assistance as a result of challenging the decision to end or reduce their entitlement to the enhanced rate of mobility, are able to remain within the Scheme pending the outcome of the re-determination or appeal. Given that options 1 and 2 may require longer term negotiations with the UK Government then the priority should be ensuring either option 3 or 4 is made available in these circumstances.

Given that Motability Operations reported £559.9m in profit after tax for the year to September 2021, the Group would also suggest that any costs of extending the Scheme to those in receipt of Short-term Assistance should be met by the Scheme providers. If the current providers will not agree to this, then these costs should be met, for now, by the Scottish Government with a requirement written into future iterations of the Scheme that the costs are met by the Scheme provider.

The Group would welcome reassurance that processes are being put in place to ensure that these individuals are able to remain within the Scheme while in receipt of Short-Term Assistance.

Conclusion

We are pleased to see the launch of the Accessible Vehicles and Equipment Scheme. At the same time, we are concerned that barriers remain due to tax exemptions and those in receipt of Short-Term Assistance are at risk of losing their vehicles, even though this is cited by current recipients as the main reason they want to receive Short-Term Assistance.