Fleets help VAT reclaim review
21 October 2015
Author: Daniel Puddicombe
The fleet industry is working with the Government as it conducts its latest review of the rate at which businesses can claim back VAT incurred on the hire or lease of cars driven for both business and personal use.
Since 1995, businesses have been able to reclaim 50% of the VAT incurred on the finance element of a company car leasing fee. The European Commission has to approve this 'derogation' and requires the UK Government to justify and renew it every three years. The current arrangement comes to an end on 31 December 2016.
At present, businesses can reclaim 50% of the VAT on finance rentals, and a leading lease firm has claimed in an email to its customers that HMRC has advised leasing companies it could drop that to 40%, as it believes more than half of business car usage is private rather than business miles.
To date, HMRC has asked the BVRLA to provide data on the split between private and business mileage covered by fleet drivers.
The BVLRA is currently canvassing its members to provide data that backs up claims that fleet users still travel further on business than on private journeys.
In an email seen by BusinessCar, which was sent to Ogilvie Fleet customers, the leasing company said that the Government has claimed that 60% of miles travelled in company cars are for private use, and consequently stated that the amount of VAT that can be claimed back should be lowered to 40%.
"The data sample the Government is basing this information on is very small and, we believe, not representative of the majority of fleet users," the email said. "Indeed, our belief is that the real position is likely to be the opposite of the Government's claim and thus that at least 60% of miles travelled in company cars is, in fact, for business use."
In the survey, the BVRLA is asking respondents to list the number of their cars that are subject to benefit-in-kind tax, the total number of miles undertaken by the car fleet and the percentage of business miles, and how the number of employees the company has.
"This is one of a number of regular data requests we make to members. The evidence we gather through this and other surveys is an essential part of our work with policy makers," a BVRLA spokesman told BusinessCar.
An Ogilvie spokesman told BusinessCar. "A leasing company doesn't normally carry data on the split between private and business mileage, so we are working with the BVRLA for the good of the industry to get as much data to see what the real fleet mileage breakdown is."
Data supplied to BusinessCar by mileage audit company The Miles Consultancy shows that 79% of company car drivers and 69% of grey fleet drivers, from a sample of 6000 drivers, recorded that the majority of their mileage is for business purposes.
"If anything, fleets should be able to claim more than 50%, although the general trend is for mileages to fall and business percentage to fall as well," Paul Jackson, managing director of The Miles Consultancy told BusinessCar.