THE Driver and Vehicle Licensing Agency has told the Society of Motor Manufacturers and Traders that VAT will not be charged on the controversial £25 registration fee for new vehicles. An SMMT spokesman said it was good news - although the industry still objected strongly to the introduction of the fee.

'I suppose we should be grateful, but when the motorist already pays so much into Government coffers it is difficult to see why they should pay the £25 at all. To add insult to injury by adding VAT to the charge would not have pleased private buyers or fleets,' he said.

The industry reacted furiously to the 'out of the blue' proposal from Transport Minister Gavin Strang in January for a one-off registration charge of £25 which would apply to all new cars, vans and trucks. A public consultation was launched, but before the consultation period was even over DVLA civil servants told the SMMT they were unwilling to alter the proposal, which is due to come into force on April 1 unless it is overturned by MPs.