Today’s UK budget, announced by chancellor [finance minister] George Osborne, contains many auto-related measures and industry groups have been quick to comment.
The most unpopular aspect is the retention of the controversial planned August GBP0.032 rise in fuel duty, particularly amongst transport groups. UK trucking companies consider this – and the UK’s highest-in-Europe fuel duty in general – particularly unfair as they have to compete with European rivals with access to cheaper fuel.
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Freight Transport Association (FTA) chief economist Simon Chapman said: “The chancellor has squandered a very real opportunity to support UK industry, jobs and economic recovery, by his budget policy on fuel duty. Independent research has shown that a cut in diesel duty of 2.5p per litre would have created an additional 175,000 jobs with no loss of revenue to the exchequer [UK treasury]. But, by contrast, the fuel duty increase of 3p per litre scheduled for August will increase the average cost of lorry operation by around GBP1,200 per vehicle per year – all on top of other price rises which are inevitable as a consequence of the current and anticipated increases in the world price of oil. Higher commercial vehicle operating costs inevitably impact on the price of everything we use or consume, and contribute to inflation and higher consumer prices.
He added: “The much heralded fair fuel stabiliser has emerged as a damp squib. All it does is to formalise fuel duty increases above inflation if world oil prices fall below US$75 per barrel. At the very least, what he should have done was to commit to freezing fuel duty when world oil prices were above $100 per barrel.”
More positively, the FTA welcomed news that annual vehicle excise duty (aka VED, colloquially referred to as ‘road tax’) for commercial vehicles would be frozen.
The latest budget does, however, also include measures intended to simply planning and tax laws which should help automakers, their local sales units and dealer networks by, for example, making it easier to change the designated use of a building under local planning rules.
The government also aims to improve access to business development loans, especially for small businesses such as local dealerships, parts factors and local repair garages.
The budget also restructures the way in which annual VED is levied and paid for by both company car drivers and private motorists.
Key points are:
- Fuel – The 3.02p per litre fuel duty increase scheduled for 1 August, 2012 will go ahead, despite numerous calls for the chancellor to suspend this in a market with the highest fuel duty in Europe.
- From 1 April, VED rates will increase in line with the retail price index, apart from rates for heavy goods vehicles which will be frozen in 2012–13.
- The government is to consider whether to reform VED over the medium term “to ensure that all motorists continue to make a fair contribution to the sustainability of the public finances, and to reflect continuing improvements in vehicle fuel efficiency”.
- In addition, the government aims to develop a direct debit system to allow motorists to spread VED payments which can only currently be paid for in six- or 12-month lump sums. The government will seek the views of motoring groups on these measures.
- Company car tax rates 2014-16: the percentage of list price subject to tax will increase by 1% for cars emitting more than 75g/km of carbon dioxide to a maximum of 35% in 2014-15, and by 2%, to a maximum of 37%, in both 2015-16 and 2016-17.
- From April 2015, the five-year exemption for zero carbon and ultra low carbon emission vehicles will end. The percentage for zero emission and low carbon vehicles will be 13% from April 2015 and will increase by 2% in 2016–17.
- From April 2016, the government will remove the 3% diesel supplement differential so that diesel cars will be subject to the same level of tax as petrol cars.
- The government will exclude certain security ‘enhancements’ from being treated as ‘accessories’ for the purpose of calculating the cash equivalent of the benefit on company cars made available for private use. The changes take effect retrospectively from 6 April, 2011 [the beginning of the current tax year].
- The government will freeze the van benefit charge at GBP3,000 in 2012-13. From April 2015, the five-year exemption for zero carbon vans from the van benefit charge will expire.
- Car fuel benefit charge (FBC) 2012–13 and 2013–14 – From 6 April 2012, the FBC multiplier for company cars will increase from GBP18,800 to GBP20,200, and will increase by 2% above the RPI in 2013-14. The government has also committed to pre-announcing the FBC multiplier one year ahead.
- Van fuel benefit charge (FBC) 2012–13 and 2013–14 – From 6 April 2012, the van FBC multiplier will be frozen at GBP550 and will increase by the RPI in 2013–14. The government has also committed to pre-announcing the FBC multiplier one year ahead.
- Capital allowances: business cars first-year allowances (FYAs) – From April 2013, the government will extend the 100% FYA for businesses purchasing low emissions cars for a further two years to 31 March, 2015. The carbon dioxide emissions threshold below which cars are eligible for the FYA will also be reduced from 110g/km to 95g/km and leased business cars will no longer be eligible for the FYA.
- Capital allowances: business cars main rate – From April 2013, the carbon dioxide emissions threshold for the main rate of capital allowances for business cars will reduce from 160g/km to 130g/km. The threshold above which the lease rental restriction applies will also reduce from 160g/km to 130g/km.
Automakers’ lobby group, the Society of Motor Manufacturers and Traders (SMMT) commented only in general: “Today’s budget recognised the significance and importance of a rebalanced, export-led economy, by taking steps to encourage international investment in R&D and manufacturing in the UK through considered taxation reforms and incentive programmes.”
“The chancellor’s actions to improve R&D tax credits and develop a catapult for transport systems and future cities will help trigger substantial extra business investment in the years ahead,” said chief executive Paul Everitt in a statement. “The UK automotive industry is attracting major levels of investment and creating real opportunities for engineering and manufacturing businesses.
“The proposed independent review by Lord Heseltine into the role of government in delivering pro-growth policies provides a welcome next step in establishing a comprehensive UK industrial strategy. Government’s continued support for low and ultra-low carbon vehicles is also an essential part of delivering on its environmental and industrial ambitions.”
British Vehicle Rental and Leasing Association (BVRLA) chief executive John Lewis said, rather more specifically: “This is clearly a budget for business and employment that is likely to stimulate growth for many of the fleet industry’s customers.
“However, the chancellor’s enthusiastic efforts to drive down emissions-based capital allowances for company cars could be a step too far, too soon.
“The fleet sector is the only part of the new vehicle market that is still growing at the moment. It will adapt to the new tax regime as it always does, but these ambitious targets could bring a temporary stall to the market as businesses re-evaluate their fleet policies.”
Commenting on the unpopular fuel duty rise, Lewis said: “The chancellor has missed an open goal by deciding not to cut fuel duty. We will see public outrage as fuel prices continue to rise ahead of the scheduled August duty increase.
“Buying fuel to get to work or deliver your company’s products and services is not a discretionary spend. To continue to ratchet up fuel duty, as if it is a pernicious luxury like alcohol or tobacco is misguided and cynical.”
On electric vehicles he noted: “We have already seen that the market for electric cars has got off to a slow start. By eliminating their company car tax exemption from April 2015, the chancellor is getting rid of one of the main incentives for fleets to operate them. This measure could kill the electric car market stone dead.”
On VED he said: “The continued freeze in VED for all commercial vehicles over 3.5 tonnes will be a welcome boost for CV operators but it is unlikely to compensate for the lack of compassion shown over fuel duty.”
On company car taxes: “The emissions based company car tax system has been a little too successful, resulting in a larger than expected fall in tax revenues. So it is no surprise that the chancellor is continuing to incentivise further cuts in emissions by lowering the tax thresholds.
“We are delighted to see that the government has responded to our calls for it to abolish the unjustified 3% diesel supplement, bringing diesel cars into parity with their petrol-engined equivalents by 2016.
“We also applaud the government’s decision to listen to our calls and give employers and company car drivers a clear five-year signposting of future company car tax rates which will enable them to choose a new, lower emission vehicle – lowering their tax bill at the same time.”
On capital allowances: “The fleet industry coped with the introduction of the 160g/km capital allowance threshold when it was introduced in April 2009 and it will cope with these ambitious new emissions targets.
“However the continuing application of the lease rental restriction acts as nothing more than a double emissions tax on our industry. We will be vigorously lobbying to have this unfair fleet tax as we did with the 3% diesel supplement for company cars.”
