As announced in Budget 2009, the Department for Business, Enterprise & Regulatory Reform (BERR) will commence today, 18 May, a car and van scrappage scheme. Revenue & Customs Brief 31/09 explains the tax implications.
In summary,
Vehicles supplied under the scheme will be subject to the normal VAT and direct tax rules. The Brief explains 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.
A business purchaser of a vehicle under the scheme will only be able to claim capital allowances on the net cost to it (after the two subsidies have been deducted).
Revenue & Customs Brief 31/09 is available here