Budget 2013: Government promises more support for low carbon automotive sector
Wed 20 March 2013
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The Chancellor, George Osborne, promised more Government support for investments in low carbon cars and related technology in his 2013 Budget. There were also changes in the Company Car Tax regime to encourage the take-up of ultra-low emission vehicles and improvements in R&D tax credits. Environment groups criticised the Chancellor, however, for again scrapping a planned increase in fuel duty.
Two new Company Car Tax bands will be introduced from April 2015. The two new bands will be at 0-50g/km of carbon dioxide and 51-75g/km CO2. In future years CCT rates, the Chancellor said, will be announced three years in advance.
The Government announced that it will provide £1.6 billion of funding to support sector strategies, including automotive, during the course of 2013. The Automotive Sector Strategy will provide more details of the specific measures to be included. These are likely to look more deeply into protecting and enhancing the UK automotive supply chain, and boost innovation and skills within a competitive domestic business environment.
The Chancellor also announced that an Above the Line (ATL) tax credit for large company R&D expenditure, originally announced in the Autumn Statement is increased to a rate of 10% before tax by the Budget.
In terms of Vehicle Excise Duty (VED), rates will increase in line with the rate of inflation, apart from for heavy goods vehicles (HGVs) which will be frozen in 2013-14.
On capital allowances for ultra-low emission vehicles (ULEV) cars used for business; In last year’s Budget, the Chancellor announced that the 100% First Year Allowance would be extended until 2015 for cars emitting 95 g/km CO2. In this Budget the Chancellor announced a further three year extension until 2018 for cars emitting 75 g/km CO2 or less. This will maintain the financial incentive for businesses to purchase ULEVs.
The 1.89 pence per litre fuel duty increase that was due to take effect on 1 September 2013 was cancelled by the Chancellor. This move follows the cancellation of planned fuel duty increases in earlier Budgets.
The Budget was generally welcomed by the Society of Motor Manufacturers and Traders. Mike Baunton, SMMT Interim Chief Executive said: “The Chancellor’s actions to improve R&D tax credits will help trigger extra business investment, and the change to the Company Car Tax rules for ultra-low emission vehicles will be welcomed by many in the UK automotive sector”.
The British Vehicle Rental and Leasing Association was critical in some areas. Chief Executive John Lewis said that no action over AMAP rates meant that staff that use their own car on company business would continue to be incentivised to drive extra work miles “in their own gas-guzzlers”, branding it a “glaring blind spot in an otherwise environmentally-focused tax regime.”
He added that by removing 100% First-Year Allowances, businesses will opt to lease cheaper cars with higher CO2 emissions, hindering the momentum towards greener motoring.
Friends of the Earth's economics campaigner, David Powell, said (quoted in The Guardian): "The Chancellor's refusal to raise fuel duty in line with inflation has deprived Treasury coffers of £5bn in the last two years, leaving other parts of the economy to pay the price. The driving force behind rising petrol prices is the soaring cost of oil – the sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency."
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