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Osborne Asked To Review UK Vehicle Taxation

by Robert Lee, Tax-News.com, London

03 December 2012


UK Chancellor George Osborne is being encouraged by the Society of Motor Manufacturers and Traders (SMMT), on behalf of the country’s automotive industry, to revisit vehicle taxation in his Autumn Statement, so as to reinforce the long-term growth and competitiveness of the sector.

In a recent letter to the Chancellor, SMMT called on government to revise the Budget 2012 decision to cut company car tax rates for low carbon vehicles and commit to consumer incentives beyond 2015, and delay the proposed 2013 reduction of the writing down allowance threshold (from 160g/km CO2 to 130g/km CO2) by one year.

In addition, it requests that there should be no radical reform of Vehicle Excise Duty (VED) until at least 2020. Instead, the government should “gradually and predictably adjust the regime allowing sustainable financial returns and environmental progress without impacting the sector’s fragile recovery and development.”

While the SSMT appreciates that the VED is an important part of the government’s revenues and that, as new cars get increasingly efficient and carbon emissions fall, the taxation system needs to keep pace with developments to sustain public finances, it feels that a gradual adjustment would be the fairest and most sustainable means of maintaining income, without penalising motorists and disrupting demand.

“This year’s Autumn Statement must support government’s Industrial Strategy work, promoting the long-term prospects for low carbon vehicle technology and encouraging private sector investment in research and development (R&D), skills and capital equipment,” said Paul Everitt, SMMT Chief Executive.

“There are real opportunities for UK manufacturing from the global success of UK-produced vehicles,” he added, "but we need to ensure that companies in the supply chain can access the finance they need to grow. It would be great to see the Chancellor extend the funding available through the advanced manufacturing supply chain initiative and confirming the new R&D tax credit regime will be up and running early next year.”

In its letter, the SSMT reiterates that, to ensure the country becomes a lead supplier and market of ultra-low carbon vehicles, it is essential that taxation, incentives and infrastructure development are supported for the long-term. For example, the proposed 30g/km CO2 reduction in the writing down allowance threshold does not give sufficient lead time for industry to adjust its product mix or for buyers to adjust their ownership patterns. The adjustment in allowance should be delayed until at least 2014.

TAGS: environment | tax | business | tax incentives | vehicle tax | United Kingdom | manufacturing | research and development

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