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SMMT response to Budget 2001

Fuel typeOld Duty Rate (pence per litre)New Duty Rate (pence per litre)Reduction (pence per litre duty and VAT) Ultra low sulphur petrol47.82 45.822.35 As part of the Green Fuels Challenge, duty on road fuel gas will be cut by six pence per kg, frozen until 2004. The Chancellor also promised to: Finalise pilot projects for bioethanol, biogas, methanol and hydrogen during the year Consult biodiesel producers and car makers in advance of Budget 2002 SMMT reaction The cuts in fuel duty for ultra-low sulphur petrol and diesel, as well as road fuel gases represents good news for motorists and hauliers. It also marks further steps by Government to provide incentives for cleaner fuels and technologies. Vehicle Excise Duty – cars The Chancellor confirmed that the reduced rate of VED for cars with small engines would be extended to include those up to 1549cc from 1 July 2001. The extension of the small car engine VED rate would be backdated to 1 November 2000.Owners of cars between 1200cc and 1549cc who had purchased or would purchase a VED disc between 1 November 2000 and 30 June 2001 are eligible for a rebate of up to £55 for each annual licence purchased, or £27.50 for each six-month licence. The DVLA has undertaken to contact eligible motorists in July 2001. All other car, motorbike and bus VED rates were frozen. From 1 March this year, all new cars registered in the UK pay vehicle excise duty (VED) according to the amount of carbon dioxide their car emits. There are four new car VED rates ranging from £90 to £160. The DETR estimates that up to 70 per cent of cars registering under the new system will pay less VED than before. SMMT reaction SMMT remains concerned about the full implications of a new four-band VED system based on CO2 emissions, particularly as it will run alongside the existing system for cars registered before 1 March this year based on engine size. There is a huge potential for confusion in the market place as consumers struggle to identify what the new bands mean. All consumers need to be fully aware of the aims behind the new scheme and the effect of choosing a more environmentally friendly new car could have on running costs. Commercial vehicles Gordon Brown today swept away more than 100 different truck tax bands and replaced them with a system of seven broad rate bands. This will improve environmental performance and simplify the system for hauliers. Truck tax will be cut by over £300m a year compared to last year’s rates, bringing the UK down to among the lowest in Europe for the cleanest trucks. These new rates will come into force on 1 December 2001. The temporary truck tax rates introduced on 1 December 2000 will run till 1 December 2001. The Government claimed it has paid out more than £210m to over 120,000 hauliers in the form of truck tax rebates since last December. This has cut effective tax rates by up to 50 per cent for most hauliers. Since the Pre-Budget Report, the Government has consulted on ways to reform truck tax. The new system announced today is based largely on the ideas in the Government’s consultation document. Gordon Brown also said he wanted to go further to improve the environmental performance. He wants lower tax rates for trucks meeting the latest Euro 4 emission standards. These would apply from around 2004. The Reduced Pollution Scheme will be reviewed to see if it still offers any benefits. The Government also said it would look at the ways of paying truck tax, to see how they could be simplified. Modernisation fund Mr Brown announced a £100 million Haulage Modernisation Fund in the Pre-Budget Report. Since then the Road Haulage Forum discussed how to use the money. As a result, in England, the Government will give up to: £30 million for targeted support to retrofit older trucks running in areas of poor air quality, where nitrogen oxide and particulate emissions are most damaging. This cash will help hauliers qualify for up to £500 lower tax rates £15 million for advice on fuel efficiency, which should deliver savings of five to 10 per cent in carbon emissions and similar cuts in the typical haulier’s fuel bill £5m for training new drivers to help the industry meet new skills and manpower needs £3 million to increase Government enforcement of haulage industry regulations across the UK, at the industry’s request £2 million for some supporting measures, including a pilot scheme for the industry’s own plans to raise standards and business performance. Ultra-low sulphur diesel48.8245.82 3.52 Road Fuel Gases (LPG and CNG)15 pence per kg9 pence per kg 7.05 pence per kg Fuel duty Commitments made by the Chancellor in his Pre-Budget Report were confirmed in the Budget with cuts to both ultra-low sulphur petrol and diesel. The duty rate on unleaded petrol was also cut by two pence per litre until 14 June 2001. By this time oil companies have indicated that ultra-low sulphur petrol will be available across the country. Unleaded petrol 48.8246.822.35 Lead replacement petrol50.89 48.89 2.35 The rest of the Haulage Modernisation Fund in England will be used later when both the Government and the industry have a better idea of future needs. The Government said it would continue to develop its plans to set up a vignette system to penalise visiting trucks. These pay no UK road tax although they can work freely in the UK. SMMT reaction The reform of truck tax has generally been welcomed by the industry, although there remains concern about the significant increases between some of the bands. The delay in the review of the reduced pollution certificate scheme until 2004 is a disappointment. Road transport affects every aspect of our economy, so anything which helps keeps costs down will help the nation as a whole. Research and Development In the Pre-Budget Report, the Chancellor said that the Government would be looking at measures to boost investment in R&D across business. Today he confirmed that he would be setting out a consultation document, Increasing Innovation, seeking views on tax incentives to encourage innovation. The consultation paper outlines what would be involved in the design of an incremental R&D tax credit incentive. Some of the things that need to be considered include:Eligibility criteria Sub-contracted expenditureThe interaction with existing SME reliefs SMMT reaction The SMMT welcomes the publication of the consultation on incentives for Research and Development tax credits to companies. Climate Change Levy The Chancellor confirmed that the Climate Change Levy comes into effect on 1 April. Companies can get 100 per cent capital allowances on a range of energy saving technologies. SMMT reaction SMMT is disappointed that the Chancellor failed to announce a broadening of discount criteria for this new tax. The lack of action ensures that the majority of companies in the automotive sector will face increased energy costs in 2001. Productivity improvements and competitiveness will not be helped by the additional tax burden, which will affect component suppliers in particular. Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window) read more