A legal challenge has been launched in to the proposed new taxation measures affecting vehicles which form part of the UK’s Motability scheme. The regulations which were laid out in the 2025 Autumn budget include an application for VAT to be included to certain payments with Motability leases and the removal or restriction of Insurance Premium Tax exemptions. As a result of these changes, Motability Operations Limited has imposed some operational adjustments including:

A decrease in the mileage allowed during a year. This will be halved from 20, 000 to 10, 000 miles.

There will also be a 25 pence per mile increase on the charges for excess mileage.

These changes are not merely incidental. They represent the foreseeable and direct consequence of the underlying policy framework.

Practical Impact

For many users, participation in the Motability Scheme is not discretionary. It is essential.

Mobility enables access to:

Medical treatment

Employment and education

Daily living activities

For individuals requiring higher-than-average mileage, the reduction in allowance and increase in associated costs creates a material and unavoidable burden.

The practical effect is to compel affected users either:

to curtail essential travel, or

to incur significantly increased financial costs

In many cases, neither outcome is realistic.

The legal challenge is now in it’s advanced stages and it has been deemed that the new measures are a breech of Public Sector Equality Duty. It is claimed that the defendant failed to carry out it’s legal duty under section 149 of the act. There is no illustration that any thought has been given to sub groups of disabled people. Their circumstances would require higher levels of mobility.

The measures are said to impose a provision, criterion or practice which places disabled individuals requiring higher mileage at a particular disadvantage, without sufficient justification.

3. Failure to Take Relevant Considerations into Account

The Defendant is alleged to have failed properly to consider:

the cumulative financial impact of the measures

the essential (non-discretionary) nature of affected users’ travel

the interaction between cost increases and operational restrictions.

There are other arguments that the new legislation would undermine the actual purpose of the scheme in that it would take away the independent mobility of disabled people.

Motability Operations Limited has been served as an Interested Party.

This reflects the fact that, while the challenged decisions originate with HM Treasury, Motability is responsible for their implementation in practice and is directly affected by the outcome of these proceedings.

The claim is not brought against Motability itself.

Procedural Position

The claim has been issued and served.

Section 149 of the Equality Act 2010 places a duty on public authorities to consider how their decisions affect people with protected characteristics, including disability (source: https://www.legislation.gov.uk/ukpga/2010/15/section/149)

Indirect discrimination occurs where a policy applies to everyone but puts people with a protected characteristic at a particular disadvantage without sufficient justification

The Motability Scheme enables disabled people to lease vehicles using qualifying benefits such as Personal Independence Payment (PIP) or Disability Living Allowance (DLA) (source: https://www.motability.co.uk/about/how-it-works/)

Judicial Review is a legal process through which courts assess the lawfulness of decisions made by public bodies, rather than the merits of the policy itself

Motability Operations has said that, without these changes, the tax changes would have added around £1,100 to each lease, while its measures are designed to reduce this to around £400 on average over three years.

Proctor has called 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 from the Motability scheme.

Proctor, who will seek a high court judicial review of the tax changes if the Treasury fails to resolve his concerns, has gathered evidence from Motability customers across the UK, including those in rural areas and Northern Ireland.

He says this evidence shows “a clear pattern of impact which appears not to have been properly considered” by the Treasury when drawing up the policy.