Next week’s Budget must support an industry striving to raise competitiveness while facing rising supply chain costs, exchange rate pressures and higher end-user costs. That’s the message delivered by SMMT in a Budget submission that includes a call for stability in taxation and greater clarity on incentives to promote cleaner fuel and vehicle technologies.
Fuel duty increases above the rate of inflation are damaging to business. Last year’s duty freeze was welcomed by the industry, but SMMT believes there is a case to move away from ad hoc discretionary rises to a more direct and transparent link to the state of the global oil market.
Zero sulphur fuel
The industry has urged for early guidance on incentives for the introduction of zero sulphur fuel. Environmental benefits will accrue more quickly if the industry is given time to plan for the introduction of engine technologies that support this cleaner fuel.
Vehicle Excise Duty (VED)
VED based on CO2 emissions was introduced in 2001 and its impact is currently being assessed by government. Until results are known, the industry has called for the Chancellor to maintain the current banding and rates for cars, vans and trucks.
In the new car market, stable VED rates send a clear message to buyers of the lowest CO2 emitting models. This will be reinforced by colour-coded CO2 bands in the industry’s voluntary green label, customer information that will be available in all new car showrooms by the end of the year.
Company car tax
In his pre-Budget statement the Chancellor announced that the three per cent tax waiver for company car drivers buying the cleanest Euro 4 diesel cars would be withdrawn from January 2006. The industry believes this should be phased-out gradually, or, at the very least, be applied until the end of the tax year in April 2006.
Cleaner vehicle incentives
The withdrawal of EST cleaner vehicle grants like PowerShift has caused concern and confusion among the industry and its customers. SMMT has urged the Chancellor to look to a stable and integrated scheme based on a technology-neutral approach which must be introduced as soon as possible.
For trucks, SMMT calls for incentives for the early use of international emission standards. This principle could be applied to operators buying Euro 4 and, when the standards have been agreed, Euro 5 trucks, ahead of the deadlines for their introduction.
R&D tax credits
The industry is keen to re-engage government on the application of R&D tax credits to ensure the scheme is working, and to determine whether there is scope to enhance the basic rate.
Combination van tax
Purpose-built vans that carry goods with a payload below one tonne are an example of how tax structures must respond to changes in the industry. VAT recovery is not possible for these vehicles because they are classified as cars, forcing some firms to buy less appropriate, heavier alternatives. The Chancellor must remove this barrier to the market for smaller commercial vehicles.
The full submission and letter to the Chancellor can be downloaded below.