Smaller businesses face the double whammy of higher corporation tax bills. The Budget's treatment of tax relief available to dealers for refurbishments was highlighted as a cause for concern by Paul McKay, senior tax manager at Trevor Jones, the specialist dealer accountancy firm. “There are extensive changes to the tax relief available to dealerships in relation to their premises. From 2010 there will be no tax relief for the structure of workshops and a significant reduction on that available for the building and refurbishment of showrooms,” he said. “Dealers will need to take urgent advice if they are anticipating a major build or refurbishment,” he said.

The chancellor's decision to cut corporation tax by 2 per cent was welcomed by the RMIF's National Franchised Dealers Association, although it pointed out that only bigger dealer groups would reap the benefits while smaller outlets would be disadvantaged by the 3 per cent rise in the small business rate. “The decrease in the higher rate corporation tax is a good incentive for larger businesses and should have major benefits. They will be able to keep hold of more of their profits which can be reinvested,” said director Sue Robinson. “However the increase in the small business rate (from 19 to 22 per cent) is a blow for smaller businesses which have felt the impact of increasing tax and red tape more than larger businesses,” she said.

While the Budget saw a road tax hike for cars emitting over 225g/km of CO2 – from £210 to £300 with immediate effect, rising to £400 in April 2008 – some dealers could see a rise in demand for cars emitting under 120g/km, which now cost £35 to tax. “The road tax on gas guzzlers may have an impact on the sales figures for certain manufacturers, however the decrease in road tax for the more environmentally friendly vehicles may have the opposite effect,” said McKay.