Better deals called for businesses to reclaim fleet VAT costs

HM Revenue and Customs has been urged to support a call from the British Vehicle Rental and Leasing Association (BVRLA) to allow businesses to reclaim 60% of the VAT paid out on hire or lease costs.

The trade body, which is responsible for companies engaged in the leasing and rental of cars and commercial vehicles, carried out a survey that backs up their case for a change in the rules.

Business use

The study looked at a wide variety of companies and their leased business cars’ mileage data. According to the BVRLA, the findings clearly show that more than 60% of the total miles travelled each year by the vehicles was solely for business use.

The data, compiled with the help of a wide range of companies including ACFO, GE Capital Fleet Services, Marshall Leasing, The Mileage Consultancy and Zenith Leasedrive, covered evidence from more than 61,000 vehicles leased for business and private use. Over 795 million miles were covered by the vehicles in the past calendar year.

Robust evidence

Gerry Keaney, chief executive of the BVRLA, said: “The results of our 2015 survey provide robust evidence that the UK Government should now renew the VAT derogation to ensure UK firms leasing cars are able to lawfully and fairly reclaim 60% of the VAT paid on the finance element of hire or lease payments.”

At the moment, a business can reclaim 50% of the VAT incurred on the finance element of a company car lease or hire. However, the UK Government must justify and renew it every three years, as the European Commission has to approve it.