Budget 2007

Main concerns for dealers, according to accountancy firm, Trevor Jones:

VED

Graduated vehicle excise duty (VED) for private vehicles (registered March 2001)

VED for light good vehicles (registered March 2001)

Fuel duty

Industry comment

'The Chancellor and the green lobby may have convinced the public that this will affect rich drivers in central London,' said SMMT chief executive Christopher Macgowan.

'The truth is that many thousands of people across the UK who rely on larger-engined vehicles, like families, farmers and small business people, face another hike in motoring bills in the years to come.

'We have called for stability, clarity and a long-term approach to CO2-based taxation. What we heard today was the opposite. This is gesture politics at its most cynical,' said Macgowan.

Edmund King, executive director of the RAC Foundation, added: ‘Incentives to go green are welcome.Mr Brown's radical proposal for tax disc reforms gives a green light to cleaner motoring. Drivers and manufacturers need time to change their vehicles. Reduced tax for cleaner vehicles is a great incentive to help motorists choose the most environmentally friendly model suitable for their needs.’

Sue Robinson, director of the RMI national franchised Dealers Association (NFDA), said: 'The Chancellor has attacked the motorist with the increase in VED for 4x4s and other large vehicles, but has failed to offset this by any extra investment in transport. There are more effective ways to influence the buying habits of motorists than the ‘blunt instrument’ approach of a road tax increase.

‘Instead of punishing motorists for choosing what is available, the government should be doing much more to encourage vehicle manufacturers to develop hybrid vehicles.'

Biofuels

'The Chancellor has ignored the opportunity to generate market demand for biofuel. He seems to expect industry and the consumer to do all the work to get biofuel going, without the much-needed tax inducements or Government support,' said Ray Holloway, director of the RMI Petrol Retailers Association.

Jonathan Nash, managing director of Saab Great Britain, welcomed the Chancellor’s announcement of a two per cent discount from company car tax from April 2008 as an important new incentive for flex-fuel cars, equipped to run on eco-friendly bioethanol E85.

However, he noted that changes to vehicle excise duty (VED) would give no encouragement to private buyers of a flex-fuel car.

"Brown’s headline-grabbing increase in VED which is designed to hit the most polluting cars on the road won’t help green-minded drivers to opt for a flex-fuel car," said Nash.

"I am deeply disappointed that vehicle excise duty (VED) rates take no account of the positive contribution that biofuels can make. That makes no sense if the Chancellor's objective is to reduce CO2 from road transport," Nash pointed out.

"Although I welcome the extension of the current 20 pence per litre duty rebate on biofuels until 2010, the fact that the rebate has not been increased will do nothing to reduce the cost of eco-friendly bioethanol E85 at the pump," said Nash.

Corporation tax

Martin Hall, director general of the Finance & Leasing Association, said: "We’ll have to study the fine print, but at first sight this looks like another missed opportunity. By excluding leased assets for SMEs from the package and re-jigging allowances the way he has, the Chancellor has strengthened the current discrimination against leased assets in corporation tax, and he has damaged businesses – especially many thousands of UK SMEs – that want to use asset finance to protect their cash flows. I hope he will repair at least some of the damage in consulting on the new investment allowance."

Company car tax

Income tax

Company car fuel

Capital allowances for cars

As part of the Government’s commitment to 'reducing the administrative burden in the tax system', the Budget announced further detail on options for simplifying the rules for capital allowances on cars.

The government said today in supporting Budget documentation that its preferred option was to retain the existing 100% first-year allowance for cars with CO2 emissions up to 120g/km; use the general plant and machinery capital allowances pool for cars with CO2 emissions between 121 and 165g/km and introduce a new pool, with a lower writing-down allowance than that of general plant and machinery pool for cars with CO2 emissions above 165g/km.

'The proposed option limits the number of rates that business would have to identify. It also ensures the value of the allowance across the CO2 range represents a significant percentage of the typical car's price in order to provide an incentive towards the purchase of cars with lower CO2 emissions. In particular the option utilises the existing general plant and machinery capital allowances pool for many cars as a means of reducing compliance costs,' the Treasury said today.

The 2006 consultation suggested the Government is considering abolishing or reforming the lease rental restriction for 'expensive cars'. In moving the tax deduction onto a CO2 emissions basis, the government believes it is appropriate to reflect the CO2 bands for capital allowances purposes.

The options being considered are to:

a) abolish any lease rental restriction to all cars with CO2 emissions up to 165g/km, permitting the full allowance of leasing payments against the profits of businesses leasing those cars

and

b) apply a uniform fixed percentage disallowance on all the leasing payments that businesses can offset against profits for all cars with emissions above 165g/km.

However, the Government has said the consultation on these issues will continue. Comments made in consultation so far will be published in the summer. Further comments are required by May 16, 2007.

And finally...