Rate change plus new VAT rules creates New Year challenge for automotive industry - Deloitte anticipates that the automotive industry will wake up with a headache on New Years day as significant VAT changes, including the rate returning to 17.5% and the introduction of the new EU-wide VAT package, come into force.
To help clients implement the changes as smoothly as possible, Deloitte, the business advisory firm, has re-launched its VAT Hotline. The Hotline offers immediate general advice on any technical, practical and systems related questions on the 1 January 2010 VAT changes.
David Raistrick, indirect tax partner at Deloitte, comments: "In addition to the VAT rate returning to 17.5% after 13 months at 15%, 2010 also sees the introduction of the new EU-wide VAT Package. We anticipate an influx of queries from companies asking for clarification on how to adhere to the guidelines, and consequently we have doubled the number of staff manning the VAT hotline compared to the number we had on standby when the VAT rate decreased earlier in the year. Early indications show a significant number of calls have been received from a broad range of industry areas in addition to automotive.
"Not only will businesses have to contend with determining what VAT rate applies when sales span 1 January, they will also need to be prepared to overcome systems issues, such as reprogramming systems and completing VAT returns, and the practical issues including re-pricing sales tickets.
"Getting the wrong VAT rate on big ticket items such as motor vehicles could be costly to dealers or result in an unexpected cost to customers. Similarly, there is some confusion regarding leases that span the 1 January date."
The VAT Package includes changes to the rules that determine where a supply is made for VAT purposes - currently services are generally treated as being supplied in the country of the seller, from 1 January 2010 this change to the country of the customers for business to business transactions. Additionally, there will be a new requirement to file EC Sales Lists for services supplied to other EU countries and new rules simplifying the procedures for claiming back VAT incurred in other EU countries.  (Deloitte, www.glassguide.co.uk/autowired - 21.12.09)

Union calls on GM to pursue alternative to Saab closure - The European Metalworkers' Association has called General Motors to back workers at Saab's Trollhattan factory who, it says, have made enormous sacrifices to reduce costs and help the company survive the economic crisis.
These efforts, together with the consultation process with the Swedish unions and authorities, have produced a viable business plan for the future of the company, says the Union.
"We trust therefore that General Motors will fully shoulder its responsibilities and agree on an alternative solution to closure of the Trollhattan plant so that all these efforts will not have been in vain", said EMF General Secretary Peter Scherrer.  Closure would mean the loss of the 3,400 direct jobs in the company as well as up to 10,000 indirect jobs in supplier companies in the region. Manufacturing industry in the area has already been hard hit by the crisis, but closure of Saab would also put the entire Swedish vehicle manufacturing industry at risk.
Saab Automobile is in fact a viable company with a highly-skilled workforce that can produce high-quality, competitive cars, says the Union, which says the plant is now ready to go ahead with production of a new model.
The Union says that it fully supports the appeal from the Swedish unions to General Motors management to thoroughly investigate new offers despite the company's announcement that it would begin closure of the Saab Automobile Trollhattan plant last Friday.
The EMF wants GM management and the Swedish Government to work hand-in-hand to pursue all alternative avenues to closure.
General Motors is reportedly continuing to study an offer from Spyker Cars for the acquisition of Saab.  (EMF, www.glassguide.co.uk/autowired - 29.12.09)

France to rethink carbon tax plan – A new carbon tax that was supposed to go into effect in France at New Year has been struck down, delivering a blow to President Nicolas Sarkozy. Frances’s Constitutional Council, a legal compliance watchdog, said there were too many exemptions for polluters in the tax plan.  The body said 93% of industrial emissions, other than fuel use, would be exempt from the tax.  The tax was set at 17 euros (£15) per tone of emitted carbon dioxide (CO2).
Prime Minister Francois Fillon has said the government will now work on a new law taking account of the legal ruling. (bbc.co.uk – 30.12.09)

2009 new car sales fall to 2 million - New car registrations rose 38.9 per cent to 150,936 units in December as consumers flocked to showrooms to avoid January's VAT increase but year-end sales fell to under 2 million.
Full year registrations, however, despite the introduction of the scrappage scheme in mid-May, were down 6.4 per cent to 1,994,999 units, the lowest level since 1995, according to figures released by the SMMT. Since its introduction, the scrappage scheme has accounted for over a fifth of all new car registrations and is estimated to represent 20.8 per cent of the December market.
Pundits will now be looking to see whether sales will fall off in the first quarter of 2010.  Average new car CO2 emissions fell by 5.4 per cent on the 2008 level to 149.5g/km in 2009, aided by the scrappage scheme.
"The December new car market was boosted by the Scrappage Incentive Scheme and consumers looking to avoid January's VAT increase," said Paul Everitt, SMMT chief executive.
Earlier expectations - "The 2009 market of 1,994,999 new car registrations was significantly above early expectations and reflects the positive impact of the scheme, due to end in February.
"Another tough year awaits the UK motor industry in 2010, with new car registrations expected to be below 2009 levels and only limited recovery in the van and heavy commercial vehicle markets.
"Sustaining the progress made in the latter part of 2009 will require stronger demand from fleet and business buyers, alongside the greater availability and affordability of credit and finance," he continued.  (www.motortrader.com – 07.01.10)

Used car wholesale values increase by 34.7% year-on-year - Average used car wholesale values fell by 4.1% to £6,875 in December compared to the previous month, but are still 34.7% higher than in December 2008.  Manheim Auctions’ latest market analysis for cars also showed average values in the fleet sector rose by 0.7% (£43) to £6,249.  Dealer part exchange values fell by 3.0% (£68) to £2,168 while manufacturer stock fell by 9.2% (£1,219) to £12,016 although this was due in large part to changes in the stock mix.  Mike Pilkington, Manheim Remarketing managing Director, said: “Although average wholesale values fell in December they are still 34.7% (£1,770) higher than 12 months ago.  “The dealer and manufacturer sectors experienced value falls in line with seasonal expectations while the fleet sector performed better than predicted due in large part to the increase in values of 4x4s.  He added: “We are starting 2010 in a stronger position than 12 months ago and, although we will not see the dramatic value rises of January 2009, I expect prices to remain strong during the first quarter.”  (Am Online, 04.01.10)
Van prices down on 2007 peak –Manheim’s latest three-year market analysis for vans show average wholesale used van sale values are now exceeding 2006 levels by 4% or £127.  However, at £3,263 the average remains 10.7% (£389) lower than 2007, when the market hit its peak. Only two van segments are outperforming their 2007 values – car vans and 4x4 commercials.  Alex Wright, Manheim’s commercial vehicles sales director, said: “Prices should ease during the final quarter due to seasonality and we are also starting to see increases in average age and mileage.
“If this trend continues, due to contract extensions and deferred fleet replacement programmes, we will see the re-emergence of a two-tier marketplace with older, higher mileage and more damaged vans suffering a ‘softening’ in values with the more desirable sub-60,000 mile vehicles making strong money.”  (AM Online, 29.12.09)