VAT worries stop car scrappage scheme
Ford and Honda are delaying their involvement in the car scrappage scheme - following concerns about VAT.
The problem arose last Thursday, the Society of Motor Manufacturers and Traders (SMMT) revealed when final details of the scheme were released by the department for Business, Enterprise and Regulatory Reform (BERR).
"Most of the details are still being worked out with BERR," a SMMT spokesperson said.
"The issue arose last Thursday in the last minute details. It has been a month since the scheme was announced and the government only sent details out on Thursday."
He explained the issue mostly effects high value and low value cars where the profit margins are the lowest and how the tax burden is spilt between the manufacturers and dealers.
Ford had offered savings of as much as £3,000 on top of the £2,000 discount from the scheme - but the scheme is now on hold for what is expected to be just a few days.
At total of 38 manufacturers were set to take part in the scheme.
Business secretary Peter Mandelson stood by the scheme
He said: "The scheme has been met with a flood of enquiries from customers. It will provide a boost to the industry and kick-start sales."
Interest in the car scrappage scheme has been massive, report manufacturers.
Ford states it has experienced the same number of hits on its scrappage web page in the five days after the Budget than on its most popular page throughout the whole of March.
Honda reported a 15 per cent rise in sales enquiries since the Budget, while Renault has seen a 30 to 60 per cent increase in showroom traffic and website hits rising 50 per cent.
The car scrappage scheme offers drivers £2,000 off a new car when they scrap their existing vehicle if it is over 10 years old.
Full details of the car scrappage scheme are available here.
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