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Van owners (and VAT) to benefit from extended car scrappage scheme

The government’s decision to extend the car scrappage scheme could prove helpful to businesses with vans.

Over £300 million has already been invested in the scheme, which encourages car drivers to trade in vehicles older than 10 years in return for a £2,000 discount on new models.

Now Lord Mandelson, the Business Secretary, has announced that a further £100 million is to go into the scheme.

The government has estimated that the extension will fund a further 100,000 vehicles, bringing the total up to 400,000.

As well as additional public funding, the government has also changed the qualifications for the scheme.

The age eligibility for cars has been dated to 29 February 2000 (the previous registration cut-off point was 31 August 1999).

There was good news for van drivers too. Now owners with vans aged over 8 years can qualify for the scheme (the original requirement was that vans needed to be ten years old).

The scrappage scheme is still due to come to an end on 28 February 2010 or when the current funding ends, whichever is the sooner.

Business groups applauded the decision.

Steve Radley, director of policy at EEF, the manufacturers’ organisation said:

“Industry will welcome this decision as a recognition government understands the need to underpin such a key sector, protect vital supply chains and skilled jobs.

“There are big challenges ahead for the industry, but UK companies should be well placed to turn the shift towards low carbon vehicles into an opportunity. Continuing the scrappage scheme will help industry weather this storm, safeguarding its future and allowing a more orderly transition.”

David Frost, director general of the British Chambers of Commerce, said: “I welcomed the announcement considering that demand is still uncertain, but that has to be it, given the state of the finances.”

Edmund King, president of the AA, pointed out that the scheme has helped to boost the government’s tax take, generating almost enough VAT revenue to make the programme nearly self-financing.

Mr King said: “VAT on a £7,000 car is £913, which with the £55 new car tax compares with the £1,000 government grant for each vehicle.”

He added: “As more people begin to find work, perhaps requiring longer journeys, the chance to upgrade to a newer, more reliable, cleaner, greener, safer car will be crucial. In addition, with VAT returning to 17.5 per cent in the new year, cutting fuel and maintenance costs will be a welcome boost for lower-income drivers.”