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BVRLA to campaign for increase in VAT reclaim rate for lease rental charges

Since 1995, businesses have been able to reclaim 50% of the VAT incurred on the finance element of a car leasing agreement, reflecting the business use of company cars. This is done under a “block derogation”, which removes the need for hirers or lessees to keep mileage records for individual cars.

The next deadline for renewal of the derogation comes in 2014. The Treasury would like to see this reclaim reduced from 50% to 40% and has come to the BVRLA for more detailed figures – and the data has proved rather interesting.

After consulting with a number of business mileage capture providers, the BVRLA has provided figures on over 200,000 vehicles, representing a cross-section of industry, and including perk, essential user and Government cars.

The figures show that business mileage accounts for roughly 62% of the total, with private mileage at 38%.

The BVRLA has added that this puts it in a great position, where it can actually push for an increase in the VAT reclaim percentage that is more in line with the true market.

John Lewis, chief executive of the BVRLA, said: 'Knowing what we do now, it is difficult to see the leasing industry accepting anything less than the introduction of a new 60% block derogation for the UK. If this is not offered, we could end up in a situation where the industry asks for the VAT reclaim to be settled case by case, with fleets having to calculate on a portfolio basis.

'This is what already happens in some other European countries. It is a major administrative burden some leasing companies and their customers, but more and more fleets are using mileage capture systems now.

'The bottom line is that the sums at stake are just too large to ignore.'

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.