The Chancellor’s Autumn Statement - Implications for the Motor Industry
What has been clear over recent years is a broad direction of travel in how additional money is being raised by the Treasury. Rather than make outright tax rate increases, the Government has sought to raise money by tightening down on eligibility to tax reliefs. Good advice is therefore essential to making sure your business remains tax efficient.
The ever expanding tax legislation always imposes additional costs, both in terms of extra taxes and compliance burdens. However, this year’s Autumn Statement saw surprisingly few changes. Below I will highlight some of the main changes that will impact the motor sector.
Also of interest to the motor sector: our expert motor team have provided recent analysis on Brexit and we have a guest blog on the implications of the Bribery Act.
The Annual Investment Allowance (the amount of capital expenditure that can be written off in full for tax purposes) remains at £200,000 per annum. From 23 November 2016 to March 2019, businesses will be entitled to a 100% First Year Allowance for the cost of installing electric charge-point equipment for electric vehicles.
A ‘salary sacrifice’ scheme involves replacing cash salary with a benefit that is more advantageously taxed or not taxed at all. An example would be an employee reducing their taxable in exchange for additional holiday.
These tax and employer’s NIC savings from such schemes are to be withdrawn for new schemes from 6 April 2017. Arrangements involving pensions, childcare, Cycle to Work and ultra-low emission cars will still retain their tax and NIC advantages.
Existing arrangements will be protected for a transitional period until April 2018, and existing arrangements for cars, accommodation and school fees will be protected until April 2021.
Insurance Premium Tax
From 1 June 2017, Insurance Premium Tax rises from 10% to 12%. This is supposed to raise most of the money to pay for spending measures in the Autumn Statement. Possibly to offer some balance for this unwelcome increase, the Chancellor also announced an intention to crack down on fraudulent whiplash claims, which he suggested would reduce the average motorist’s insurance premiums by £40. I’m pretty sure we’ve had similar crackdowns announced before!
The Chancellor confirmed the Corporation Tax rates previously announced: 19% for three years from 1 April 2017, then 17% from 1 April 2020.
From April 2017, there will be significant changes to the corporate tax reliefs for interest payments and for losses brought forward. There will be a restriction for large international groups, which have net interest expenses of more than £2 million, net interest expense of more than 30% of UK taxable earnings, and a UK net interest to earnings ratio that is greater than that of the worldwide group.
From the same date, there will be a restriction on the amount of profits that can be offset by brought forward losses. Only 50% of current profits will be eligible for relief, but there will be greater flexibility over the types of profit that can be relieved by losses incurred after April 2017. A standalone company or group with profits up to £5 million will not suffer.
Noticing that VAT hasn't seen much change, Alison Horner, VAT Partner say's 'VAT is a cash cow for the Treasury and there are far bigger Brexit things to worry about. With Nissan receiving assurances about Customs duties post EU exit, there is some concern in the press that this may amount to state subsidy and breach the WTO rules. If we end up with WTO tariffs the Customs tariff on the import of cars into the EU will be 10%, which will have a massive impact on already slim margins.'
One practical change affecting the motor sector, which has quietly come into force recently, is the amended guidance for when dealers can zero rate the sale of a car to a disabled person. The guidance can be found in VAT form 1616. Dealers will be pleased to see that the rule of 1 car every 3 years has not come into force.
If you would like further information on the topics discussed in the article please contact Gareth Peters, speak to your local MHA MacIntyre Hudson advisor or send an enquiry.