The Budget was a ‘missed opportunity’ to introduce measures to incentivise car buyers to transition to electric vehicles, believes the SMMT.
Chief executive Mike Hawes believes ministers should have done more to help ‘support the transition’ to zero emissions vehicles.
Hawes said: ‘A lack of measures to help transform the industry and market as we transition away from pure petrol and diesel cars and vans within just nine years is a missed opportunity.
‘Even with the industry investing significantly in new zero emission technologies, increasing the uptake of these vehicles to the levels required by 2030 remains a mammoth task and will require more than strong supply.
‘We had hoped to see more measures to support the transition, not least consumer encouragement and investment in infrastructure.’
Electric car buyers currently benefit from a £3,000 government grant when they buy new, however there is nothing to incentivise used car buyers to opt for electric.
Yesterday, motoring experts told Car Dealer that an interest-free loan scheme for used EV buyers, similar to that offered in Scotland, should be adopted across the UK.
The cost of electric cars when compared to standard combustion engined models is one of the main reasons cited by buyers not to change to an EV.
Hawes welcomed the Chancellor’s extension to the furlough scheme, though.
He added: ‘The extension until the end of September provides a lifeline to many businesses, not least car showrooms which remain closed, and was a welcome response to the industry’s calls.
‘Whilst we welcome in principle the announcement of a “super deduction” for investment in plant and machinery, it is not clear if it will work for many manufacturers in the sector.
‘We will assess the fine detail of the measure, but we still seek fundamental reform of business rates which are a disincentive to investment in plant and machinery at a time when we are trying to encourage innovation in products and processes to support the transition to net-zero.’
Meanwhile, accountancy experts BDO have highlighted a number of useful announcements in the Budget that could benefit car dealers.
Head of business tax at BDO Chris Bond said: ‘The announcements will allow dealerships to plan over the coming two years to take advantage of a number of reliefs, as well as to be in a strong position when tax rate rises do come into force.
‘Overall, the Budget provides motor retailers with opportunities across a number of areas and as we know, the industry is always quick to adapt to change and take advantage of these.’
Bond’s highlights include:
The 130 per cent super-deduction for new plant and machinery expenditure means that dealerships can plan and manage their position such that they can either generate losses that can be used immediately or build up a tax cushion against future corporation tax rises in 2023.
Carry back losses
The ability to carry back tax losses for up to three years will allow further tax refunds to be generated and so assist cash flow. Car dealers should take note that if the 25 per cent corporation rate is substantially enacted in this year’s Finance Act then a nasty deferred tax surprise may be waiting for them in the tax charge line when they sign their 2020 accounts. This is especially relevant for large listed entities as well as larger private groups.
The further development of a motor retailers online presence may give rise to the opportunity to claim R&D tax credits in order to provide additional cash flow assistance.
Dealerships may want to review their remuneration strategy between salary and dividends once the new corporation tax rates come into force as the level of profits that are made will have an overall impact on which is more efficient at differing levels of profit.
Ongoing support through the Coronavirus Job Retention Scheme (furlough) will allow employers to flexibly manage their workforce until the end of September 2021. With the scheme is continuing it’s also a good time to review claims submitted to ensure they are aligned with the rules and take into account the various changes that have been implemented. This is particularly important where dealerships are considering restructuring their business especially as HMRC’s focus moves towards enquiring into claims
Support for trainees, apprentices and job seekers with additional funding provided to employers was improved. With funding of £1,000 available for each English work placement of a 16-24 year old during the 2021/22 tax year and an increase of funding to £3,000 for each new apprentice hired between April 1, 2021, and September 30, 2021. For some motor retailers this will offer a good opportunity to consider the shape and make up of their workforce.
The freeze in fuel duty is welcome, but is also a prelude to future increases in order to promote the green agenda and to hit the government’s zero net emissions target. Motor retailers will therefore need to be aware of the changes and continue the EV transformation journey from both a sales and service offering perspective.
The most notable VAT change relates to a new penalty points system from April 2022 that will replace the current default surcharge system. The intention is to align the Income Tax and VAT penalty position and so dealerships should ensure that their VAT systems and processes are ready for the change next year
For those that took advantage of the VAT deferral scheme between March and June 2020, there is now the potential for a five per cent penalty of the deferred VAT still outstanding if by June 30 2021 they have not paid in full, opted into the new payment scheme or made an alternative arrangement. Dealerships should take action to review their options here and factor this into their forecasting for the year to come
The business rate exemption is again a further welcome provision for motor retailers to allow them to plan with certainty. This has been extended to the end of June, and two thirds after that up to a cap of £2m per business.
- Join our breaking news WhatsApp group
- Listen to the latest Car Dealer Podcast
- List of the Top 100 profitable car dealers in the UK