Fleet News

BVRLA calls for rethink on VAT reclaim rate

The BVRLA is calling on the Government to increase the amount its members can reclaim on the VAT they incur.

Since 1995, businesses have been able to reclaim 50% of the VAT incurred on the finance element of a company car leasing fee.

John Lewis, chief executive of the BVRLA, explained: “Using data available at the time, the reclaim was introduced on the basis that at least half of a company car’s mileage was business use and should therefore be VAT deductible.

“It is allowed as a ‘block derogation’, which means that it is generally available. This has major benefits because it removes the need for hirers or lessee’s to keep records of the mileages of individual cars.”

The European Commission keeps a watching brief and requires the UK Government to justify and renew the derogation every three years.

Lewis continued: “The next deadline comes in 2014, and realising that its own National Travel Survey data set is very thin, the Government came to the BVRLA for some more detailed figures to support a renewal of the derogation.

“This is where things got interesting.”

After consulting with a range of business mileage capture providers, the BVRLA was able to gather figures on over 200,000 vehicles representing a cross-section of industry sectors, including perk, essential users and Government.

“We had the data audited by statisticians, who verified that it constitutes a robust and reflective sample,” said Lewis.

“This showed us that business mileage accounts for roughly 62% of the total, with private mileage at 38%.

“It is not hard to understand why, when the Government has been very successful in its strategy of taxing company car drivers out of private fuel benefit in recent years.”

The figures leave the BVRLA in an interesting lobbying position.

Lewis continued: “From being in a position where we were looking for data that would support a renewal at 50%, we are now pushing for an increase in the VAT reclaim percentage that is more in line with the true market.

“We estimate that a 10 percentage points increase in the VAT reclaim is worth around £100m annually for our members customers.

“Knowing what we do now, it is difficult to see the leasing industry accepting anything less than the introduction of a new 60% block derogation for the UK.

“If this is not offered, we could end up in a situation where the industry asks for the VAT reclaim to be settled case by case, with fleets having to calculate on a portfolio basis.”

This already happens in some other European countries and is a major administrative burden for some leasing companies and their customers. However, more fleets are using mileage capture systems now.

Lewis concluded: “The bottom line is that the sums at stake are just too large to ignore.”

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  • Alastair Kendrick - 04/12/2012 15:11

    It will be interesting to see if this lobbying results in any agreed adjustment. Based on the evidence it should but this differs from the recent data produced by central Government showing a significant reduction in mileage travelled by company car and growth in use of public transport. To say that a move towards claiming on actual mileages may be the way forward if the Government do not agree to a move on the 50% adjustment needs to be taken with care given the quality of data that would then be needed and the amount of additional administration in making a claim.

  • Premierblue - 07/12/2012 14:17

    Call me a cynic, but I'm willing to bet that none of the tens of thousands of Salary Sacrifice leases was included! Each registering somewhere between 0% and 1% business mileage I expect.

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