How Does the 2017 Spring Budget Affect Car Dealers?
8th March 2017
Dealer Management System and Car Dealer Website provider Dragon2000 have analysed today’s budget from a dealership perspective, and compiled a comprehensive guide for Car Dealers and Garages explaining how the 2017 Spring Budget affects their businesses, their dealership staff and their customers.
Direct effects on your business
The changes to the business tax regime which were set out in the Autumn Statement last year remain unchanged – so a reminder for dealers that from April this year the government corporation tax will be cut to 19% and then again to 17% in 2020. Corporation tax currently stands at 20%, having already been reduced from its highest level of 28% in 2010.
From April 2018, if you take dividends rather than pay yourself a salary in your company payroll you will see your tax-free allowance drop from the current £5000 to £2000 – more than halving the allowance, which was only introduced in 2016.
The planned increase to the standard IPT rate from 10% to 12% from June this year is still going ahead, which was announced in the Autumn Statement.
Good news for dealers based in more rural areas who find may find achieving consistent fast broadband an issue, or are in areas that can barely manage 3G connectivity on their mobile phones.
The government has earmarked £200 million for local projects to build reliable and fast broadband networks, and will be offering full-fibre broadband connection vouchers to businesses to help takeup of the programme. Up to £16 million will also be invested in the first phase of a national trial of new 5G mobile network technology, which promises lightning fast speeds. In tests, it has been reported to be achieving speeds of around 10Gbps, 12 times faster than the average speed of 4G.
Having wider stable and fast fibre broadband availability and 5G mobile connectivity will give dealers more options, especially in being able to take advantage of dealer management systems with hosted data, which are more secure and leaves dealers less reliant on maintaining their own network infrastructure, data back up and security, and also mobile apps for creating appraisals, sales presentation videos and Vehicle Health Checks and VHC videos.
The other effect is that consumers will have better connectivity too, which will only lead to more interaction and communication with dealers over online channels.
Dealers may find themselves either facing a hefty rise when the business rates revaluation takes place in April 2017 for their showrooms, vehicle storage and office properties, or benefiting from a rates cut – it all depends on their location.
Business rates were last set in 2010 and were based on 2008 property values and are usually assessed every five years, based upon the value from two years previously, and broadly speaking, the annual rentable value for which the property could be let.
The rates were due to be reassessed in 2015, based on 2013 values, but the government postponed that revaluation to avoid a sharp increase at the time. Due to dramatic increases in commercial property values in some areas compared to less prosperous regions that have seen values drop sharply between 2008 and 2015, there will be large swings in the new rates.
The government has pledged £435 million to support businesses who will lose their small business rates relief and face significant increases in rates bills due to the revaluation assessing their property at a value above £15,000. Businesses coming out of rates relief will not pay more than £600 extra in rates this year than they did last year.
A study by Colliers International revealed that there are significant fluctuations in the 2015 rental values, particularly in the retail market, with decreases of 80% and increases in excess of 400%. It found those with the biggest increases were in areas such as parts of Central London, Outer London and some areas in the South East, whilst those benefitting from the largest decreases were areas in the South West, East Midlands, Merseyside, North East, North West, Yorkshire and Humber, West Midlands and Wales.
For start-up car dealer and garage businesses, the thresholds at which they can register for VAT will increase from £83,000 turnover to £85,000.
Effects on your dealership staff
Personal Allowance will increase next month by £500 to £11,500, and the Higher Rate Threshold will increase by £2000 to £45,000 which means your staff will be able to keep more of what they earn. According to the budget report, the amount your staff can earn tax free in 2017-2018 will be over 75% higher than in 2010.
This is in line with the announcement in the 2016 Autumn Statement that the government is committing to raise the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21.
The new tax-free childcare scheme being rolled out this year will provide up to £2000 per year in childcare support for each child under 12. Parents of younger children can apply first, with all eligible parents able to apply by the end of 2017. Working parents in England will also be able to apply for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.
Dealers should note, that if they currently offer their staff a childcare voucher scheme, employees won’t be able to receive childcare vouchers if they start using the new Tax-Free Childcare scheme, even if this means changing a salary sacrifice arrangement.
The government has also stated that they are consulting on how taxation of benefits in kind and employee expenses (including those not reimbursed by their employer) could be made fairer and more coherent.
What it means for your customers
In addition to the VED rates shake-up for new vehicles registered after April 1st coming into force next month, it has been confirmed that VED rates for vehicles registered prior to April 1st will increase by the percentage of the Retail Prices Index (RPI).
For heavy goods dealers, your customers will be pleased to know HGV VED and Road User Levy rates will be frozen from 1 April 2017.
Already announced in the Autumn Statement but taking effect for tax year 2017-2018, for the 7th year in a row, fuel duty is frozen, saving drivers a reported average of £130 a year.
The government will consult on a detailed draft plan this spring which will set out how the UK’s air quality goals will be achieved. This will also include exploring the appropriate tax treatment for diesel fuel vehicles, ahead of making any tax changes in the Autumn Budget 2017.
The government is planning to investigate how consumers can be better protected by making terms & conditions clearer, including digital contracts and introducing fines for companies that mislead or mistreat customers. For car dealers, this is likely to have a bearing on finance agreements and insurance products.
It was announced in last year’s Autumn Statement, £1.1 billion from the National Productivity Investment Fund (NPIF) was to support local transport and £220 million to address national road
network congestion trouble spots.
Funds allocations have already been made for 2017-18, supporting local projects like improving Cheshire’s A483 corridor and Blackpool’s town centre, a new roundabout in Hales, Norfolk and
major maintenance of the Leicester Outer Ring Road. Local authorities will be allocated £690 million more, with £490 million made available by this autumn.
The government will now develop options based upon a congestion relieving strategic study which has been completed on the south west sections of the M25. Regional allocations of the £220 million are taking place with details of individual schemes to be shortly announced by the Department for Transport.