The Chancellor has committed to extending full expensing to the rental and leasing sectors in a landmark shift.

Draft legislation will be published within weeks to extend full expensing to leased assets “when affordable to do so”

Speaking in today’s Budget, Jeremy Hunt said: “Having listened to calls from the CBI, Make UK and the BCC, we will shortly publish draft legislation for full expensing to apply to leased assets, a change I intend to bring in as soon as it is affordable.”

First announced as a temporary measure in the 2023 Budget, full expensing replaced the previous Super-Deduction tax relief for qualifying equipment and machinery including fleet vans/trucks – but not cars – and was due to run until 31 March 2026.

It was then made permanent in the 2023 Autumn Statement, providing a 100% first-year allowance that enables companies to write off the full cost of their investments against their corporation tax bill in a move to unleash a wave of new business investment across the UK. Under full expensing, for every pound a company invests, their taxes are cut by up to 25p.

The rental and leasing sectors were excluded from claiming these investment allowances – and the BVRLA said the Government had missed a massive opportunity. Its research has shown that opening the tax incentive up to the rental and leasing sectors could unlock an additional £1bn worth of investment into low- and zero-emission commercial vehicles.

The Government has now said that draft legislation will be published within weeks to extend full expensing to leased assets “when affordable to do so”.

While there’s no news on whether the tax break will be extended to cars, the BVRLA said the commitment to expand it to van leasing was “a monumental step forward to rectify an historic injustice”.

Chief executive Gerry Keaney said: “The BVRLA has been an active voice in achieving this change and welcomes the opportunity to engage further in delivering this long-overdue alignment in tax policy.”

Alphabet GB’s Caroline Sandall-Mansergh, consultancy and channels development manager, also lauded the announcement.

“Alongside many others in the industry, we recognise this change as crucial to ensure the new scope for full expensing is fit-for-purpose for the fleet of today. Many companies are turning to leasing vs. outright ownership of vehicles as a more cost-effective route for investment, and as a result, these businesses will see significant benefit in tax exemption through full expensing.

“We hope the Government will provide further clarity on timelines, and that it will continue to work with leaders within the leasing sector to ensure the reformed full expensing policy meets the investment needs of the modern business.”