Leasing body to step up VAT rebate rise campaign
29 June 2010
The BVRLA is to intensify its campaign to have the VAT recovery rate on vehicle leasing increased, following last week's Emergency Budget announcement that VAT will rise from 17.5% to 20% in January.
The 50% VAT recovery rate should be increased in line with current business car usage, according to the rental and leasing industry's trade association, which has found evidence of a rise in business usage compared to private. If a car is bought outright and the driver is allowed any private use then the firm can't claim back the VAT on it, but if it is leased they are currently able to reclaim 50% of the VAT on
the finance element of lease. The 50% figure came from historic data that suggested a 50:50 split of private versus business usage. But the latest figures from the BVRLA showed the ratio has now shifted to around 70:30 in favour of business use, coming from a sample size of 451 million miles across 286 companies. As a result, the organisation is calling for the VAT recovery rate to rise to 70%.
Chancellor George Osborne's headline announcement in the Budget was a rise in the rate of VAT from 17.5% to 20% from 4 January 2011, and this has given the BVRLA fresh incentive in its talks with HMRC.
The BVRLA has closely examined its data to ensure it could be substantiated and wasn't a recessionary blip. "Over the last few years, many of those people doing low business miles have switched to cash-for-car or employee car ownership schemes, and there has also been a very deliberate policy to tax people out of private fuel," BVRLA chief executive John Lewis told BusinessCar. "So why shouldn't the mix have changed? If you're having to pay back your company for every private trip, you think more about it."
The HMRC is currently considering the data and the BVRLA is hopeful of a decision by the end of July. "They have no better data than what the industry has provided, so they've gone away to consider how to use it," said Lewis.
"The dialogue is constant - they want to continue the derogation and not get into individual calculations," said Lewis, who added that the organisation now has to lobby on behalf of its members and their customers. "Now we've found the data, we're obliged to do something about it," he said. "For us it's now become more significant because it could offset the increase in VAT.
"It would be good for our members and their customers," continued Lewis. "It is our new mission."
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