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BVRLA seeks a ‘fair deal’

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The BVRLA has vowed to continue to collect detailed records to help fleets get a fair deal when the VAT reclaim rate is next decided.

It follows a compromise being reached between the association and HM Revenue and Customs (HMRC), which will see the rate remain unchanged at 50%. 

Since 1995, companies have been able to recover half of the VAT incurred on the finance element of a company car leasing fee, as long as there is some private use of the vehicle.

However, HMRC wanted to reduce the rate to 35% or 40%, reflecting National Travel Statistics (NTS) research, which suggested a large increase in private mileage.

The BVRLA conducted its own research, looking at the split between private and business mileage for more than 100,000 cars, compared to the NTS sample of 417 people.

It discovered that rather than reducing the rate, which would have cost vehicle rental and leasing customers £100 million, the VAT reclaim level should be increased to 60%, putting £100m back in the pockets of fleets (Fleet News, December 13, 2012).

Gerry Keaney, chief executive of the BVRLA, said: “We managed to produce some very robust data supporting an increase in reclaimable VAT rather than a decrease, which persuaded HMRC to revise their plans.”

However, while the BVRLA was not able to achieve the 10 percentage point rise it was arguing for, Keaney believes it secured the best deal available to the industry.

“In the end, we accepted HMRC’s suggestion that the figure stays at 50%,” he said.

“This seemed like a reasonable compromise given the timeframe involved and it meant that fleets didn’t face the complicated alternative of having to calculate VAT reclaims on a case-by-case basis.”

Individual assessments are already commonplace in some European countries and during negotiations the BVRLA warned if the new, higher rate wasn’t accepted by HMRC, the industry could push for such an approach in the UK.

That would have meant companies having to produce a report showing the split between private and business mileage on their fleet, creating unwanted red tape for fleets.

However, while it’s clear from Keaney that this approach wasn’t an outcome the BVRLA would have necessarily welcomed, it remains unclear how long the UK can maintain its exemption from standard European VAT rules.

The European Commission requires the Government to justify and renew the rate at which businesses can recover VAT every three years.

In the previous review, which took place in 2010, no change was proposed and prior to that the Government argued for a continuation of the 50% block given the work involved in a case-by-case assessment.

In 2016, the industry will have to get around the negotiating table again. Keaney said: “We will continue to collect detailed records that provide a statistically representative view of the business and personal mileages fleets are doing.

“The VAT reclaim position we take in the future will depend on what the figures tell us in three years’ time.”

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  • Alastair kendrick - 05/06/2013 15:35

    It is great the results of the research found that the 50% adjustment was reasonable it should be noted that the Directive does not use the adjustment to the standard rate. On this basis if Europeon courts decided to apply rules strictly there would be need to calculate by reference to actual private/ business mileage. This clearly would add to red tape so should be resisted

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