Automotive industry reaction to the UK government’s Budget Statement today could reasonably be summarised as mildly positive. There wasn’t a great deal in it that impacts the industry directly.
The Chancellor froze fuel tax and there were a number of measures relating to investment in new technologies that were welcomed.
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Mike Hawes, SMMT Chief Executive, also welcomed a consultation on Company Car Tax and how it applies to low-emission vehicles. “The 2016 Budget contained some positive measures and we were pleased to see the Chancellor recognise SMMT’s call for greater support for energy efficient technologies, through both the extension of Climate Change Agreements and a forthcoming consultation on the future Company Car Tax treatment of ultra low emission vehicles,” he said.
However, he also expressed disappointment that business rates were not reformed. “The removal of plant and machinery from business rates valuation would have encouraged investment in innovative manufacturing technologies, improving still further UK automotive industry productivity and safeguarding our competitiveness,” he said.
Simon Down, tax director at Deloitte, also welcomed the announcement that CO2 emissions thresholds determining the capital allowances treatment for company cars will fall in April 2018. “A reduction in the First Year Allowances threshold will mean that only plug-in hybrids or electric vehicles will attract the 100% first year rate of capital allowance. These are the only vehicles currently available with CO2 emissions below the 50g/km threshold.
“The announcement also means that new company cars purchased from April 2018 with emissions that exceed a reduced threshold of 110g/km will receive a less favourable corporation tax relief treatment. This will delay when a business receives corporation tax relief. It is anticipated that the new CO2 emissions threshold will also apply for the 15% flat rate reduction that applies for business cars that are leased rather than purchased.
“Today’s announcement combined with rising company car tax rates will make employers and employees move to company cars with lower CO2 emissions a more pressing financial incentive.”
Phil Harrold, automotive partner, PwC, welcomed the freeze on fuel duty, saving the average motorist around GBP75 a year, with a saving of as much as GBP270 a year for a small business with a van.
“The Chancellor’s decision to take the high road and not the well-trodden path will be warmly welcomed by motorists, hauliers and small business owners alike,” he said. “Freezing fuel duty for the sixth year running is undoubtedly a surprising and populist move. And given the current oil price and no indication of upwards price pressure, it also seems a generous policy.”
UK economic growth is now forecast to be 2% in 2016, down from 2.4% in November’s Autumn Statement. The outlook for GDP growth in 2017 and 2018 has also been similarly shaved down – to 2.2% and 2.1% respectively. The UK car market has been running at an annualised rate of 2.7m units, but many analysts expect the market to slow during the course of 2016.
