How does the Chancellors announcements affect motor retailers?

As taxpayers, we look and listen to Chancellors delivering their budget in the expectation that he or she will say something directly relevant to what it is we are interested in such that we often spend little time listening to what he or she has said overall. The motor dealership network and their advisors are no less guilty of this than any other interested observer of the Chancellor earlier today.

 

The market for the sale of consumer products (other than hand gels and toilet paper) was already flat before coronavirus took control of the consumer and businesses, with the world struggling to realign the global economy and the twin headed monsters, supply and demand.

 

The decisions announced by the Chancellor to invest looks like he has done so on a one in a lifetime scale that may leave many questions unanswered about how it might be afforded. However, there is little doubt that the measures were aimed by the Chancellor directly at kick starting business in the short term, with measures to combat health concerns, and in the longer term with infrastructure projects. This may well be a vital lifeline to support demand and alleviate a crisis for many businesses.

 

Motor dealerships will welcome the investment in “green energy” creating both opportunity and demand for new efficient vehicles including the extension of the plug in car grant to 2022-2023 and equally, the extensive roadbuilding programme including substantial funds for the repair of potholes. On the other hand the raising of levies which otherwise have been frozen on  cheap gas (as opposed to electricity) which is commonly used in dealers to heat premises, will mean that overhead costs will likely increase further in future.

Most disappointing of all was the announcement to confirm that the widely forecast changes in CGT entrepreneur’s relief were correct reducing the value of the relief by 90% from £10,000,000 to £1,000,000. Many dealerships are the crossroads wondering what the future might hold. Many more will be in the early stages and some a little further advanced in terms of structuring and delivering upon their strategy for the future. This announcement come as a considerable disappointment.

 

Moreover, whilst Corporation Tax remains at its lowest level for many years at 19% the pre-budget announcement that it was not to reduce further to 17% is also a disappointment. Freezing fuel duty is welcome, as is the increase in the Structures and Buildings Allowance to 3% but these offer fringe benefits to the motor dealership.

 

Accordingly, it may be the bigger picture of what the Chancellor has announced that might give the most comfort to motor dealerships in future. Stabilising the economy in the short term and investing in the economy in the longer term may be less direct in terms of how it might impact businesses but if it creates the right conditions in which the economy is stable and grows, motor dealerships may look upon his announcements positively in future?

 

Mike Jones, Chairman, ASE plc

For more information please contact our Head of Tax Chris.Cummings@ase-global.com