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Budget 2007

  • Click here to access the BBC's Budget 2007 calculator, to work out exactly how your finances will be affected.

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

  • There will be a reduction in the taxable benefit of company cars on employees for cars which are capable of running on E85 fuel. This will have the impact of employees choosing to run cars capable of using this fuel. There are a limited number of franchises that currently have models that operate on this fuel.

  • There are extensive changes to the tax relief’s available to dealerships in relation to their premises. From 2010 there will be no tax relief for the structure of workshops and a significant reduction on the tax relief’s available for the building and refurbishment of showrooms. Dealers will need to take urgent advice if they are anticipating a major build or refurbishment going forward.

  • The road tax on 'gas guzzling' 4x4 vehicles may have an impact on the sales figures for certain manufacturers, however the decrease in road tax for the more environmentally friendly vehicles may have the opposite effect. Dealers should ensure that their sales teams are briefed on the changes to avoid any objections and also enhance their sales pitches in certain areas.

  • The temporary 50% rate of first-year allowances for small enterprises will be extended for a further 12 months.
  • A new annual investment allowance for the first £50,000 of expenditure on plant and machinery in the general pool will be introduced from 2008-09. The detailed design and scope of this allowance will be the subject of consultation.
  • From 2008-09 the rate of writing-down allowances for plant and machinery in the general pool will be reduced from 25% to 20%.

  • From 2008-09 the rate of writing-down allowances on long-life asset expenditure will increase from 6% to 10%.

    VED

  • the rate of VED for the most polluting cars (Band G) increased to £300 in 2007-08 and £400 in 2008-09 and for low carbon Band B cars reduced to £35 from £50 in 2007-08 with that rate then frozen for the subsequent two years

  • The rates for Band C-E, cars registered before 2001 and all LCVs by £5 in each of the next three years

  • The rate for Band A vehicles frozen at £0

  • the rate for Band F raised by £10 in 2007-08, then £5 in each of the subsequent two years

  • the VED rates for petrol and diesel cars will be aligned since the differential in nitrogen oxides and particulate matter emissions for news cars 'is expected to fall to close to zero once Euro V and VI emission standards become mandatory'.

  • All changes to VED rates are effective from March 22.

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

    VED band CO2 emissions (g/km) Change Alternative fuel cars Petrol cars Diesel cars
    A 100 and below - £0 £0 £0
    B 101 to 120 -£15/-£5/-£15 £15 £35 £35
    C 121 to 150 £5/£5/£5 £95 £115 £115
    D 151 to 165 £5/£5/£5 £120 £140 £140
    E 166 to 185 £5/£5/£5 £145 £165 £165
    F 186 to 225 £10/£5/£5 £190 £205 £205
    G* 226 and above £85/£90/£85 £285 £300 £300

    *for new cars registered from March 23, 2006.

    VED for light good vehicles (registered March 2001)

    £ per year Change New rate
    Euro IV incentive* +£5 £115
    Standard rate +£5 £175

    *for Euro IV compliant vans registered between March 1 and December 31, 2006

    Fuel duty

    Pence per litre (unless stated) Old duty rate Change New duty rate
    Ultra-low sulphur petrol/diesel 48.35p +2p 50.35p
    Sulphur-free petrol/diesel 48.35p + 2p 50.35p
    Biodiesel 28.35p +2p 30.35p
    Bioethanol 28.35p + 2p 30.35p
    Liquefied petroleum gas used as road fuel 12.21p per kg + 4.28p per kg 16.49p per kg
    Natural gas used as road fuel 10.81 per kg + 2.89p per kg 13.70p per kg
    Rebated gas oil (red diesel) 7.69p + 2p 9.69p
    Fuel Oil 7.29p + 2p 9.29p

    All fuel duty rate changes will take effect from October 1, 2007.

  • An increase in fuel duty rates of 2 pence per litre from October 1, 2007, a further 2 pence in 2008, and 1.84p on April 1, 2009.

  • For 2007-08 the duty for rebated oils will increase by 2 pence per litre, also from October 1.

  • further support for biofuel uptake including extending the 20 pence per litre biofuels duty differential to 2009-10. The duty differential for 2010 - 11 will be announced in 2008.

  • Road fuel gases: the differential for CNG and main road fuels will be maintained in 2009-10 and will be decreased for LPG by a further 1 pence per litre

    Industry comment

  • VED

    '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

  • The Government announced that it is considering the case for changing the structure of AMAPs to 'align the tax and National Insurance treatment and to ensure that rates and thresholds are set at an appropriate level to promote environmentally friendly business travel'.

  • Following on from the announcement in last year's budget of a reduction in the lower company car tax threshold of 15% from 140g/km to 135g/km from April 6, 2008, the Chancellor said today that the thresholds for 2009-10 percentage rate will be frozen at 2008-09 levels.

    Income tax

  • Basic rate of income tax reduced by 2 pence from 22 pence from next April.

    Company car fuel

  • The fixed figure on which the company car fuel benefit charge is based will be maintained at £14,400 in 2007/2008.

  • The VAT fuel scale charge will increase in line with fuel pump prices from May 1, 2007.

    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...

  • Beer to rise by 1p a pint from midnight on Sunday, cider by 1p a litre, wine by 5p a bottle and sparkling wine by 7p. Duty on spirits unchanged.

  • Cigarettes to rise by 11p a packet. VAT on nicotine patches to be cut from 17.5% to 5%.
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