Fears have already been raised that HM Treasury’s (HMT) review of tax relief on business cars will push up the costs of corporate motoring.
Officials at the British Vehicle Rental and Leasing Association (BVRLA) warned in last week’s Fleet News that HMT’s proposals will affect every business car taken on by fleets.
It highlighted that the cost of running business cars is a normal business expense and writing down allowances (WDAs) are available to help with this.
The current situation for WDAs is that the values of all of a firm’s cars costing under £12,000 are aggregated and then written down by 25% per annum. Cars costing more than £12,000 are written down individually at a maximum of £3,000 each year.
In both cases, a balancing charge or allowance is applied when the vehicle is disposed of.
That then allows the full market depreciation to be counted in. HMT is now proposing that all cars with CO2 emissions under 165g/km to be written down at 20% per annum and cars over 165g/km at 10% per annum.
However, the BVRLA says, HMT proposals are for writing down on a reducing balance basis and with no balancing charge being allowed when the vehicle is sold.
Fleet consultant Colin Tourick said: “I cannot see how these proposals will be revenue neutral. Fleets operating mainly smaller cars will find they are building up large balances of unrelieved capital allowances in their tax computations. In many cases, companies are going to have to wait years after these cars have been sold before they receive their full tax relief. This has the whiff of a stealth tax about it!”
And in a letter in today’s issue of Fleet News (see page 10), the BVRLA has moved to stress that all business cars will be affected by the move, no matter how they are funded.
The letter, penned by head of communications Robin Mackonochie, says: “So whether you buy your vehicles outright, whether you buy them via a funded method or whether you lease or contract hire them, costs, if these proposals are brought in, will rise. And rise at the same level for every single company in the UK that operates business cars.’
An HMT spokesman said a decision has yet to be made.