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Fleets overpaying millions on VAT, says BVRLA

By / 11 years ago / Latest News / No Comments

Under current legislation, those firms that lease their cars are only allowed to recover 50% of the VAT portion of the finance element of their rental payments. This percentage is based on the assumed level of private use of the vehicle.

However, new mileage figures assembled by the BVRLA and shared with HM Revenue & Customs clearly show that the current recovery rate is too low, says the association. The new data from more than 120,000 drivers covering nearly 2.5 billion annual miles shows that business usage (excluding commuting) is responsible for around 70% of distance travelled, and this has been the case for at least three years.

Despite this evidence, HMRC had decided not to seek permission from the European Commission to increase the VAT recovery rate.

On this basis, the BVRLA has called for the current 50% VAT recovery rate available to businesses leasing cars to be increased to allow a fairer level of VAT recovery. The association is writing to HMRC, calling on it to reflect the true business mileage position shown by its data. It is also refuting the department’s justification that the 50% recovery rate is a ‘simple figure’ that ‘businesses are familiar with’.

BVRLA chief executive, John Lewis, said: '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.'

He added: '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 not an option.'

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