Fleet News

Pre-Budget Report: what you need to know

  • Key facts in the PBR for fleet decision-makers.


The chancellor Alistair Darling’s pre-Budget report (PBR), which was delivered to the House of Commons today, contained several measures that will directly affect the country’s fleets.

The reduction in VAT of 2.5% to 15% has been welcomed: “This should give the leasing industry an invaluable boost during these tough times,” said John Lewis BVRLA director general.

“It reduces the amount of VAT that is repayable when disposing of qualifying lease cars.”

The BVRLA estimates the VAT changes will save the industry £153 million by the end of next year.

Users of contract hire will see an effective 1.25% reduction in costs due to the 50% VAT disallowance.

However, the chancellor said he is also introducing the deferred increase in fuel duty from Monday – a move that was described as giving the road transport industry a “real kicking” by Mr Lewis.

Although the chancellor claimed that, because of the VAT cut, the cost of fuel will fall.

The report also confirmed that fuel duty will increase again by 1.84 pence per litre on 1 April 2009; and by 0.5 pence per litre above indexation on 1 April 2010.

The announcement on the much-anticipated changes to capital allowances on company cars failed to become a reality.

The PBR said: “The existing arrangements will be replaced by an emissions-based approach.

"This reform will take effect from 1 April 2009 for corporation tax and 6 April 2009 for income tax.”

The treasury has now published its draft legislation setting out the full details (see separate news story).

The PBR, which was “leaked like a sieve” according to CBI president Martin Broughton, also contained changes to the planned increases to Vehicle Excise Duty (VED), which should help the fleet industry.

While the six new and much-criticised VED bands will still be introduced as planned next year, the chancellor has relented on increases that would have hit residual values of larger, higher polluting cars hardest.

Next year, the maximum increase in VED will be capped at £5, while in 2010 the maximum will be £30.

In addition the ‘showroom’ tax for new vehicles will still be introduced as planned.

“This was always a blunt instrument to tackle green issues.

"The threat of the VED rise has hung over the retail motor sector throughout this year,” said Tony Gannon, Commercial Director, BCA.

“Hopefully this u-turn, combined with greater flexibility from the lenders, will see some renewed confidence in new car sales and a knock-on pull-through to used car sales too.”

In addition, the chancellor announced that £3bn of capital spending brought forward, which includes additional motorway building projects.


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