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18/05/2009
Car Scrappage Scheme Dealt Blow Amid VAT Row
A Government-scheme where consumers can scrap their old banger for a new model, has been dealt an embarrassing blow after three large manufacturers suspended the scheme.
The £300m scrappage scheme, announced in last month's Budget, is intended to boost consumer confidence and kick-start demand for new cars.
However, Ford, Fiat and Honda were halting deliveries of cars to dealers after a row over who pays VAT on the vehicles, on the day the scheme was launched by Prime Minister Gordon Brown and Lord Mandelson.
The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the funding runs out.
Thirty eight manufacturers are taking part in the scheme, covering all the major brands.
But, the Society of Motor Manufacturers and Traders confirmed that some firms are now urgently seeking clarification over who will be paying VAT.
Such schemes have worked well overseas, particularly in Germany where new car sales soared 40% in March this year. The UK motor industry is in need of a similar boost, especially as new car sales have fallen for 11 months in a row.
A spokesman for Ford said: "Based on details which have only become apparent late in these negotiations, Ford is working to resolve some outstanding administrative issues but is confident it can begin sales within a few days of the official start date.
"Detailed information on the scrappage scheme was not included in the Budget. However, Ford as leader of the UK vehicle market welcomed it on behalf of customers, industry employees and also for its safety and environmental benefits."
He added: "All manufacturers planning to participate in the scheme have been looking at the precise mechanism for funding their £1,000 contribution towards the total £2,000 incentive offered in return for trading in a 10+year-old vehicle, and discussions with the Business and Enterprise Department have been ongoing since the Budget."
A Honda spokesman also said: "Relating to the £1,000 contribution - the original request was for a contribution of £1,000 from the industry.
"We were looking at splitting that between the manufacturer and our dealers but we're being told that we can't do that."
(JM/BMcC)
The £300m scrappage scheme, announced in last month's Budget, is intended to boost consumer confidence and kick-start demand for new cars.
However, Ford, Fiat and Honda were halting deliveries of cars to dealers after a row over who pays VAT on the vehicles, on the day the scheme was launched by Prime Minister Gordon Brown and Lord Mandelson.
The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the funding runs out.
Thirty eight manufacturers are taking part in the scheme, covering all the major brands.
But, the Society of Motor Manufacturers and Traders confirmed that some firms are now urgently seeking clarification over who will be paying VAT.
Such schemes have worked well overseas, particularly in Germany where new car sales soared 40% in March this year. The UK motor industry is in need of a similar boost, especially as new car sales have fallen for 11 months in a row.
A spokesman for Ford said: "Based on details which have only become apparent late in these negotiations, Ford is working to resolve some outstanding administrative issues but is confident it can begin sales within a few days of the official start date.
"Detailed information on the scrappage scheme was not included in the Budget. However, Ford as leader of the UK vehicle market welcomed it on behalf of customers, industry employees and also for its safety and environmental benefits."
He added: "All manufacturers planning to participate in the scheme have been looking at the precise mechanism for funding their £1,000 contribution towards the total £2,000 incentive offered in return for trading in a 10+year-old vehicle, and discussions with the Business and Enterprise Department have been ongoing since the Budget."
A Honda spokesman also said: "Relating to the £1,000 contribution - the original request was for a contribution of £1,000 from the industry.
"We were looking at splitting that between the manufacturer and our dealers but we're being told that we can't do that."
(JM/BMcC)
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