What is the next step?

Have the one in your drive towed.

Try this, borrow a car from a friend who doesn't use that car. When your neighbor leaves the building park the borrowed car in that spot and leave the vehicle there. If he says anything say the car is in your care but if he gets rid of the car he doesn't use you will make an effort to get rid of the borrowed car. Might work...

If it has a current sorn (and this being free there's no reason not to have one!) and it's not on a public highway then DVLA have no interest AT ALL in the vehicle. His parking of another car on your property is a civil matter and you need to consult a solicitor!

Sue for an easement through your neighbors property to access your drive (which actually should already exists). An easement can not be blocked allowing you to have the car towed at the owners expense.

Presumerably you have spoken to your neighbour about him parking on your driveway? He also uses the car, so as soon as he does park yours on your own driveway and tell him he will need to park on the road from now on as your drive is not his property and if he does you will get it towed, or you go and see a solicitor and get them to write a letter warning that if he continues to park on your drive you will take further action (which is civil court)

Hi! I'm back.

How did the car on the drive way turn out?

Can you do me a favour answer my question, please?

What does he say when you tell him to stop parking in your driveway?

Since it is yours, you could set up a locked gate so he can't park in it.