RCB/31/09 Tax implications of the Vehicle Scrappage Scheme
Revenue & Customs Brief, Issue 31. 14 May 2009
The government announced at Budget 2009 the introduction of a temporary vehicle scrappage scheme. It is a voluntary scheme which will be administered by participating motor manufacturers and dealers, along with the Department for Business, Enterprise and Regulatory Reform (BERR). Information about it can be found on the BERR website and at Directgov — Motoring. You may also contact BERR's enquiry unit on Tel 020 7215 5000, or email the BERR Automotive Unit with “scrappage” entered in the subject heading.
A. VAT and direct tax profits implications
Vehicles supplied under the scheme will be subject to the normal VAT and direct tax rules. The purpose of this brief is to explain how those rules apply to the £1,000 subsidy payable by BERR on qualifying supplies made under their scheme, plus the £1,000 discount paid by the manufacturer.
If you are a manufacturer participating in the scheme you will be providing a £1,000 subsidy to the final consumer (over and above any other subsidy or discount you might provide), even though you have no direct contractual