Investment ‘Super Deduction’ must include rental and leasing

The BVRLA and six other leading trade associations have written to the Chancellor, urging him to modernise the way Government uses tax incentives to drive business investment in new vehicles and equipment.

The associations are concerned that the eligibility criteria for the 130% super deduction allowance (SDA) fail to include leasing and short-term hire – two of the most common ways that businesses acquire new plant and machinery. This means that only businesses that purchase new vehicles or equipment outright can access the allowance – despite the fact that thousands of companies rely on leasing and rental to finance these acquisitions.

For the commercial vehicle sector, 1-in-5 trucks and 1-in-6 vans on UK roads are rented or leased.

The SDA was introduced on 1 April 2021 to stimulate a post-pandemic recovery in the UK economy. It means that any investments a business makes in main rate (main pool) plant and machinery will qualify for a 130% capital allowance deduction.

Gerry Keaney, Chief Executive Officer of the British Vehicle Rental & Leasing Association, said:

“With the UK economy still emerging from the impact of the COVID pandemic, the Government is urging fleets to spend billions of pounds on new ultra-low emission vehicles.

“A huge proportion of this investment will be made through vehicle leasing and rental, which provides businesses with the fixed cost and flexibility they need to continue decarbonising.

“The eligibility restrictions on the super deduction mean that this tax incentive is only benefiting the larger, cash-rich businesses that can afford to buy vehicles outright,” added Keaney.

“The Government must move with the times and use investment incentives that support the acquisition methods modern businesses rely on.”

A range of industry bodies from across the tax, logistics, construction, manufacturing and small businesses sectors have called for the extension of the SDA criteria to include short-term hire and leasing:

Finance and Leasing Association

Civil Engineering Contractors Association

Forum of Private Business

Logistics UK

Manufacturing Technologies Association

Association of Chartered Certified Accountant

*Article Source http://www.bvrla.co.uk