What the Budget means for car dealers

Time 12:10 pm, October 30, 2018

CONSUMERS could be more willing to change their cars thanks to the income tax breaks delivered in the chancellor’s Budget yesterday.

That’s the conclusion of Mike Jones, chairman of profitability specialists ASE, which analysed the details of Philip Hammond’s speech.

Jones said the Budget ‘had the feel of a pre-election giveaway’. And he added: ‘The underlying messages about increased employment levels and the income tax breaks provided to basic and higher-rate taxpayers should be good news for the UK automotive sector.

‘The chancellor’s big business tax giveaways will benefit the automotive sector, given the considerable capital investment required in relation to motor dealerships. In addition, aside from the negative salary impact of the increases to the minimum wage, there were no immediately noticeable tax potholes which the chancellor has opened up for the industry.

Mike Jones

‘The increase in the annual investment allowance to £1,000,000 will mean that as much as £190,000 can be saved in terms of corporation tax payments when the business incurs qualifying capital expenditure.

‘As manufacturers continue to roll out corporate identity upgrade programmes, this is a welcome windfall for dealers.

‘Timing is crucial, however, as the new limit only takes effect from January 2019 and is in force for two years. Dealers should therefore delay incurring capital costs until the new year wherever possible.’

Jones observed: ‘A further measure introduces additional tax relief for the actual cost of the building, allowing a write-off of expenditure against trading profits over a period of 50 years.

‘Whilst this writing-off will reduce the tax base cost of the property upon disposal in future, businesses will be delighted to reduce their annual taxable trading profits. This only applies to contracts entered into after October 29 – a real shame for retailers who have already embarked on some massive building projects.’

Turning to the growing popularity of electric and hybrid vehicles, Jones noted: ‘The chancellor also extended the 100 per cent capital allowance available on installing electric charge points until 2023, but it is disappointing that he didn’t introduce more far-reaching measures to stimulate the sales of hybrid and electric vehicles and the charging network required to support them.

‘Whilst changes to the way digital transactions are taxed appear to be targeted at the tech giants, there is a potential note of caution for the future automotive landscape. As we see a steady increase in direct manufacturer online car sales, it will be interesting to see if the scope of this legislation is eventually widened to capture these sales as well.

‘Many automotive business owners will be breathing a sigh of relief at the fact that Entrepreneurs’ Relief was retained.

‘Finally, as we have seen in the USA, increasing the take-home pay of individuals can have a real positive impact on their willingness to purchase, which can only be good news for car retailers.’

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Dave Brown's avatar

Dave, production editor on Car Dealer Magazine, is a journalist with more than 30 years' experience in the worlds of newspapers, magazines and public relations.

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