The £2,000 government car scrappage scheme announced by chancellor Alistair Darling in the Budget has been met with some confusion by car manufacturers, which have told dealerships to put the scheme on hold. Darling proclaimed that the scheme 'will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars that are over 10 years old' - with the £2,000 to be halved between manufacturers and government, running until March 2010. With VAT currently at 15%, being increased to 17.5% in January 2010, those investing in the scheme as of next year will be faced with a less attractive deal. What is even less attractive for consumers, is that the VAT payment is to be included before the £2,000 reduction. John Whiting, tax partner at PricewaterhouseCoopers, said the idea to add VAT after the reduction appears to be 'a bit odd'. He said paying VAT on the car before the reduction will obviously give the consumer a bigger bill than if it was paid once the £2,000 was taken off. Manufacturers are also unhappy with the scheme, with some including Ford, Honda and Fiat telling dealerships to hold off from taking part until clarification is received. Whiting said that the VAT should not make much difference to manufacturers because they can claim it back, but the issue is that there might be a bit of an exempt or non-supply within the discount, which could make them partially exempt and 'unable to recover all of their VAT'. However some tax experts believe that the real issue for manufacturers is a commercial one, with concerns they are paying the full £1,000 reduction, and the dealerships paying nothing.