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It'll be Gordon's last time with the battered red briefcase, which is why business car managers need to pay extra attention to the Budget speech this year, writes Rupert Saunders
City traders will bet on anything. After all, that's what they do for a living - wagering the nation's pension funds on the next movement of the stock market. So it comes as no surprise that betting on the outcome of the Budget (due on March 21) is currently high on their list of parlour games.
Guessing the length of the Chancellor's speech is always a popular bet. Current favourite is 72 minutes (and rising). Since this is clearly the last Budget speech that Gordon Brown will have to deliver, many people foresee him taking some time to remind us all of his economic triumphs over the past 11 years. He could go on for some time.
The other strong bet is that this will be, in broad terms, a 'quiet' Budget. In essence, the Chancellor will want to leave a legacy but, at the same time, will not want to tie his successor's hands too tightly for the future.
Pay attention
Whether you bet on the Budget or not, business car managers need to pay extra attention to the speech this year. In the first place, environmental issues are a 'dead cert' to feature strongly on the agenda and that will mean even more emphasis on tax measures to change car ownership and driving behaviour.
Second, as you may remember, there are a large number of business car taxation issues still hanging over from the pre-Budget statement in December. This is in sharp contrast to recent times when decisions have been announced in the pre-Budget statement and then enacted or confirmed in the main Budget itself.
Promised (should I be using that word where politicians are concerned?) for the Budget are details of the BIK tax thresholds for 2009/10. There is no doubt that the trend to offer drivers of low CO2-emitting business cars lower BIK rates will continue. The only question is: by how much?
We already know the 15% start point for the BIK sliding scale will be cut to 135g/km and a new lower rate of 10% for 120g/km or less introduced from next year. Since this puts the tax regime ahead of current technology, I would bet on those levels being held for one more year before being reviewed again.
“Promised (should I be using that word where politicians are concerned?) for the Budget are details of the BIK tax thresholds for 2009/10. There is no doubt that the trend to offer drivers of low CO2-emitting business cars lower BIK rates will continue. The only question is: by how much?” |
Rupert Saunders |
Equally, we can be sure the Government is anxious to reduce the number of business car drivers who get their private fuel paid for by the company. Already this is uneconomic in all but a very few, exceptional cases and the new CO2-based fuel scale charge can be guaranteed to up the tax penalties.
Less clear is what the Treasury plans to do about modernising the treatment of capital allowances. Leasing companies have been lobbying for several years for the removal of the outdated concept of 'expensive cars' (those costing more than £12,000), which effectively makes outright purchase more tax-efficient as the price of a car rises.
There are clear signs that the Government has taken note of the lobbying but no clear signs yet as to what they plan to do about it. The best we can hope for here is a proposal document - presumably followed by a consultation period.
Equally unclear is the future of Employee Car Ownership (ECO) schemes. We know there is a review under way and there are some signs of disquiet in the industry that the Government is going to push through changes that might make these schemes less attractive.
On the other hand, the complexity of such schemes and the recent focus on duty of care has reduced the rate at which business car drivers are leaving the company-owned vehicle regime. My bet here is that there will be little change to the structure of ECO schemes but a tightening of the compliance rules - making it harder to get schemes approved by your local HMRC office. Let's call that a no-score draw.
Of course, BusinessCar will bring you all the latest updates on Budget Day. Just make sure you log on to www.businesscar.co.uk.
Rupert Saunders is a specialist in automotive finance and retail
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