Ahead of the Chancellor of the Exchequers’ Autumn Statement, the UK automotive industry has identified vehicle taxation as a key issue as part of a wider package of industrial strategy measures that should reinforce the long-term growth and competitiveness of the sector.

In a letter to the Chancellor, SMMT called on government to revisit three core areas of vehicle taxation that impact on motorists and industry:

Low carbon vehicles – Government should revise the Budget 2012 decision to cut Company Car Tax rates for low carbon vehicles and commit to consumer incentives beyond 2015.

Capital allowances – The proposed 2013 reduction of Writing Down Allowance (160g/km CO2 to 130g/km CO2) should be delayed by a year.

VED – There should be no radical reform of VED until at least 2020. Instead, government should gradually and predictably adjust the regime allowing sustainable financial returns and environmental progress without impacting the sector's fragile recovery and development.

The Chancellor has been asked to ensure that he uses the Statement to support the ambitions of industry and government through an internationally competitive, Industrial Strategy. The basis should be to build confidence, spur growth and enable private sector investment in jobs, R&D and equipment.  Earlier this year the Chancellor confirmed the UK tax credit regime would change to an above-the-line system creating a better incentive for this important activity. SMMT has asked the Chancellor to signal a 2013 start date for the new regime and a competitive headline rate to encourage companies to bring more R&D activity to the UK and get them spending sooner.

Budget 2012 dealt a blow to consumers, businesses and automotive manufacturers with announcements impacting confidence in the crucial low and ultra-low carbon markets, denting uptake rates and prospects for UK leadership in the field.

“This year's Autumn Statement must support government's Industrial Strategy work, promoting the long-term prospects for low carbon vehicle technology and encouraging private sector investment in R&D, skills and capital equipment,” said Paul Everitt, SMMT chief executive. "There are real opportunities for UK manufacturing from the global success of UK-produced vehicles, but we need to ensure that companies in the supply chain can access the finance they need to grow. It would be great to see the Chancellor extend the funding available through the advanced manufacturing supply chain initiative (AMSCI) and confirming the new R&D tax credit regime will be up and running early next year.”

VED is an important part of government's revenue stream and industry appreciates that as its new cars get increasingly efficient and CO2 emissions fall, the taxation system needs to keep pace with developments to sustain public finances. A gradual adjustment is the fairest and most sustainable means of maintaining income without penalising motorists and disrupting demand.

Researching, developing, engineering and building technologically advanced, fuel efficient engines and vehicles is a fundamental strength of the UK. To ensure the country becomes a lead supplier and market of ultra-low carbon vehicles, it is essential that taxation, incentives and infrastructure development are supported for the long-term to give early adopters confidence in these new technologies.

Sustainable confidence and clarity is a theme that should also be applied to capital allowances. The proposed 30g/km CO2 reduction in the writing down allowance threshold does not give sufficient lead time for industry to adjust its product mix or for buyers to adjust their ownership patterns. The adjustment in allowance should be delayed until at least 2014.

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