BVRLA News
www.bvrla.co.uk August 2010
The newsletter of the British Vehicle Rental and Leasing Association
Leased fleets’ VAT bill is out of touch with reality Leased fleets are overpaying hundreds of millions of pounds in VAT, according to new business mileage data compiled by the BVRLA. Businesses leasing cars can currently recover 50% of the VAT portion of the finance element of their rental payments. This percentage is based on the assumed average level of private use for business vehicles. However, mileage figures assembled by the BVRLA following a request by HM Revenue & Customs (HMRC) clearly show that the current recovery rate is now out of date. Data from more than 120,000 drivers, covering nearly 2.5 billion annual miles, shows that business usage accounts for around 70% of the distance travelled (excluding commuting). The data also proves that this business-private ratio has existed for at least three years – apparently showing the success of the previous government’s policy of taxing low business mileage users into cash-for-car or employee car ownership schemes, and company car drivers out of using company-provided fuel. The BVRLA has therefore called for the 50% VAT-recovery rate for businesses leasing cars to rise to a level that more accurately
reflects current mileage. It also refuted the HMRC’s claim that 50% is a “simple figure” that “businesses are familiar with”. The UK’s VAT treatment of leased cars has to be approved by the European Commission every three years. With this approval expiring at the end of the year, there is an opportunity for HMRC to seek an improved rate – instead it has said it will ask the Commission to approve the current level. “HMRC has chosen to ignore the very robust data we provided in favour of a much smaller sample of 418 drivers, based on an anecdotal survey conducted by the Department for Transport, which conveniently backs its own position,” said BVRLA chief executive John Lewis. “Before we were asked to contribute to HMRC’s research on this issue we would probably have been happy to stick with the status quo, but, on the basis of the new and very robust data, doing nothing is now not an option.” Lewis added: “There is nothing we can do to prevent VAT rising to 20% in January, but we will do our utmost to ensure that leasing customers are treated fairly when it comes to paying it.” n
VAT recovery: the missing millions The BVRLA estimate for the amount of money that could be overpaid by UK businesses leasing cars is based on the following calculation: Average annual cost of car lease (finance element) = £4,800
Potential VAT overpayment (per vehicle, per year)
=
£192
Annual VAT charge (at 20%) =
£960
50% recovery
=
£480
Approximate size of UK contract hire fleet (million vehicles) =
1.5
70% recovery
=
£672
Potential total overpayment by UK businesses (per year) = £288m
bvrla.co.uk
In this issue BAA agrees to promote car rental Airport authorities are recognising the advantages rental offers page 2 DVLA gives V5C a ‘£310m makeover’ The vehicle registration document is redesigned in an attempt to reduce sales of stolen vehicles page 3 Q&A: Electric vehicles Catherine Hutt of the SMMT faces some electrifying questions page 4 RVR: valuable insight July’s Residual Value and Remarketing Forum tackled forecasting, used van prices and electric vehicles. Catch up here! page 5 Leaseurope sets out ways to tackle fraud The European body reports on the industry’s efforts to combat fraud page 6 Survey values drop The BVRLA’s ongoing survey of predicted residual values shows a dramatic fall for the ‘basket’ of cars it tracks page 7
— Promoting responsible road transport since 1967 —