However, the scheme's incentive will be split between the government, which will provide £1000, and the car industry, which will pay the other £1000. As a result, car manufacturers must sign up to be part of the scheme and they are not obliged to take part.
Dealers of participating manufacturers will be required to do all the paperwork for the car buyer, and arrange for the old vehicle to be scrapped.
The old vehicle being scrapped must be a passenger car or small van up to 3.5 tonnes, registered in the UK on or before 31 July 1999, currently registered with the DVLA to a UK-domiciled registered keeper making the application or on a SORN notice, have a current MOT test certificate, and have been continuously registered to the owner for the 12 months precedeing the purchase.
The new vehicle must be a passenger car or small van up to 3.5 tonnes, first registered in the UK on or after the date the scrappage scheme is launched and be the first registration for the car, be a UK-specification car and registered to the same registered keeper as the vehicle being scrapped.
There will be no C02 restrictions on the new cars in order to help sales of cars from luxury manufacturers – particularly Jaguar Land Rover - and the scheme is scheduled to close in March 2010.
The path towards the scrappage discount has been tortuous, with widely reported disputes between business secretary Lord Mandelson, who has been vocal in his support for such a scheme, and the treasury, which has been desperately looking for ways to cut spending.
Later in his budget, the chancellor announced that fuel duty would increase by 2p a litre in September and by 1p a litre in real terms each year from 2010 to 2013.
He also announced Vehicle Excise Duty road tax 2009/10 rate changes will take effect from 1 May, 2009 and that the first year VED rate as announced in November’s pre-Budget report will take effect in 2010/11.
There will also be changes in company car benefit-in-kind tax from 6 April, 2011. These will result in:
- the CO2 emissions thresholds for main company car tax bands being shifted down by 5g/km.
- the £80,000 cap on company car list prices for the purposes of calculating company car benefit being abolished so that all company car drivers pay a fair rate.
- discounts for early-uptake Euro 4 standard diesel cars, higher-emitting hybrid vehicles, gas-powered and biofuel-capable cars will be abolished, in favour of a system that simply rewards lower tailpipe CO2 emissions.