Britain#;s annual Budget (the government#;s tax-and-spend plan for the next fiscal year) is usually an excuse to clobber already overtaxed motorists even more but 2002 was a watershed: duty rates on fuel were frozen by the chancellor, reducing duty in real terms by around one pence per litre.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
In line with the announcement in the 2001 Budget, the government confirmed that a new rate of duty for biodiesel of 25.82 pence per litre, 20 pence per litre below the ultra-low sulphur diesel (ULSD) rate, would take effect.
The chancellor also announced that, in 2003, the government would introduce a duty incentive to encourage the production and use of sulphur-free fuels. Subject to the outcome of a pilot project, the government also intends to exempt hydrogen used as a road fuel from fuel duty for a limited period to encourage its further development and early take-up.
The main rates of vehicle excise duty (road tax) for trucks and cars stays the same but, from May 2002, the government will introduce a new ‘AA’ VED band for low carbon cars emitting up to 120g/km of carbon dioxide, first registered from March 2001.
The new rate cuts VED for these cars by £30, increasing the incentive to choose the ‘cleanest’ cars.
In addition, from March 2003, new vans that meet the new Euro IV emissions standard will qualify for a reduced VED rate of £105.
The Society of Motor Manufacturers and Traders said it was concerned that the incentive for Euro IV vans was premature and would introduce an unnecessary complication to the market place.
The Budget also confirmed the government’s decision to introduce a distance-based lorry road-user charge following its consultation launched in the Pre-Budget Report.
This is designed to make foreign lorry operators pay towards the costs they impose in the UK and reduce the resentment felt by UK lorry drivers forced to pay to use motorways in countries such as France and Spain.
The chancellor stated that offsetting tax reductions, so that costs for the UK haulage industry would not increase, would complement the new charges. The government suggested the new charge would be introduced in 2005 or 2006 and that the Treasury would consult shortly on the details.
UK businesses can now claim 100 per cent enhanced capital allowances on their investments in new cars emitting up to 120g/km of carbon dioxide and in vehicle refuelling infrastructures for compressed natural gas or hydrogen fuel. The government committed to review these allowances further over time.
From April 2003, the new fuel scale charge for company-supplied fuel to employees will be linked to carbon dioxide emissions, including the same discounts and premiums as in the company car tax system.
There will also be a proportionate reduction if an employee receiving free fuel chose to opt out part way through the year.
The government confirmed that it will introduce a new tax credit to boost research and development undertaken by larger companies, complementing that already available for small and medium-sized companies. The new tax break will be a simple volume credit based on the total amount of research and development companies undertake, provide a 25 per cent rate of super-deduction for qualifying R&D expenditure against taxable profits and be granted to the company actually undertaking the R&D so as to provide a deduction for all qualifying R&D undertaken in the UK.
To promote business links with academic research, companies that fund research undertaken collaboratively with universities, charities and other not-for-profit organisations will also qualify.
The government announced a measure to modernise the taxation of foreign companies operating in the UK through branches. Capital would be attributed to a UK branch for tax purposes, based on the capital it would need to trade if the branch were an independent, free-standing company. The government suggested that this would bring the UK closer into line with established international practice, ensuring a level playing field between foreign companies (mainly banks) and their UK-based competitors. The government would be consulting on the technical detail of the legislation.
It was also announced, as part of the government’s crack down on abandoned vehicles, that the Finance Bill 2002 would include provisions for a new offence to ensure that the registered keeper was liable for an unlicensed vehicle.
