No thanks, Darling: Tax threat to farm vehicles ahead of Chancellor’s first budget speech

Farmers Weekly will be bringing you coverage throughout the day of Chancellor Alistair Darling’s first budget and what he has in store for farmers and rural people.

The chancellor rises to address the House of Commons at 12.30pm.

Until then, here is FWi’s round-up of some issues the Chancellor is expected to cover. (See our Budget landing page.)

Fuel Duty

With petrol at about 107p/litre and diesel at 112p/litre at the pumps, the chancellor will be under pressure to delay a 2p/litre hike in fuel duty, scheduled to take effect from 1 April.

Mr Darling announced the proposed tax rise in his pre-budget statement last October, but lobby groups have been campaigning to scrap the extra charge after petrol prices rose by almost 20% in the last year.

Business vehicles and company cars

Mr Darling is expected to unveil new plans to remove businesses’ tax benefits on corporate vehicles unless they invest in greener, hybrid vehicles – suggesting punitive consequences for farm 4x4s and pick-ups.

The move would be the biggest shake-up of the way company vehicles are taxed for four years.

Under present tax rules, businesses can offset the full capital cost of some vehicles against their corporation tax bills – but Mr Darling’s budget could mean this full relief is only available for hybrid cars or those with the lowest emissions.

Businesses running vehicles with normal combustion engines can expect to offset on 10-25% of the cost under the new rules, which could come into force within two years.

It is also feared Mr Darling could announce higher road taxes for bigger vehicles with higher emissions like 4x4s.

Corporation tax

Mr Darling may also make an announcement on proposed changes to the rate of corporation tax that businesses pay. In his pre-budget statement in October last year, he said this would be cut from 30p in the pound to 28p – although Gordon Brown had already promised to do this in his last budget as Chancellor of the Exchequer.

However, Mr Darling will now be under pressure to announce further cuts. The shadow chancellor George Osborne has called for him to cut corporation tax to 25p.

Higher taxes for essential farm vehicles – the thin end of the wedge? Have your say on Mr Darling’s first budget in our forums.