But the accountants added it’s the VAT rate rise to 20 per cent that’ll take place in January that should be worrying dealers the most.
Michelle Malone, ASE plc’s VAT manager, said: ‘This will bring back memories of last December when customers were clamouring to secure their purchase at a lower VAT rate causing major headaches for dealers.
‘Dealers would be mistaken to think that they can wait until December this year to start considering how the change will impact their sales.
‘But the long lead time on many models means that orders placed over the next few months could span the end of the year and care will need to be taken to ensure dealers do not inadvertently adopt incorrect VAT treatment.
‘Dealers will also need to consider the impact of the VAT rise on any used stock held at the time of the change – without careful thought a part of the dealer’s margin on these cars could be eaten up by the increased VAT cut for the Treasury.’
Some very important points to consider there…
Paul Brown, ASE plc’s Tax Director added there was a real positive for dealers though – the Entrepreneurs Relief has been left in place and extended.
‘From now, the amount of gains that can benefit from a 10 per cent Capital Gains Tax rate has been increased from £2m to £5m,’ he explained.
‘In practice this means that the vast majority of dealers considering disposing of their business will only pay CGT at this lower rate.’
With welfare cuts firmly on the agenda, there may be one indirect downside for the motor trade too, added Brown – the tightening up of the qualification for the Disability Living Allowance.
Brown said: ‘It will be interesting to see whether this has an impact on the number of people qualifying for the higher rate mobility element of the allowance, therefore reducing the number of potential Motability customers.’
by JAMES BAGGOTT