Super Deduction taxation changes could deliver ‘shot in the arm’ to car leasing

The Finance & Leasing Association (FLA) and British Vehicle Rental and Leasing Association (BVRLA) have called for changes to the UK Government’s taxation Super Deduction to provide a “shot in the arm” for car leasing.

The two industry bodies have urged Government to make changes that ensure vehicle leasing and plant hire are included in the 130% allowance attracted by new plant and machinery investments under the scheme which was announced in Chancellor Rishi Sunak’s March Budget.

They have argued that the change could boost the economy at a time when some businesses can ill-afford to make large capital expenditures along with the UK’s plan to boost the adoption of electric vehicles (EV) as part of the incoming ban on new petrol and diesel vehicle sales in 2030.

Research conducted by the Society of Motor Manufacturers and Traders (SMMT) recently found that that just 4.6% of privately bought cars (34,324 vehicles) were battery electric vehicles (BEVs) – compared to 8.7% (73,881 vehicles) for businesses and large fleets.

The discovery – revealed after Government’s decision to cut its plug-in car grant (PiCG) support from £3,000 to £2,500 – prompted SMMT chief executive, Mike Hawes to state: “It’s clear this has been an electric revolution primarily for fleets, not families."

Commenting on the advantages of a change to the Government’s Super Deduction taxation benefit this week, FLA director general, Stephen Haddrill, said: “The Government’s decision to restrict the scope of the super deduction amounts to a serious missed opportunity to boost investment.

“The idea that businesses grow and become more productive by buying plant and machinery outright is out-dated. Leasing and hire make far more sense.

“It preserves cash in the business and can avoid having expensive equipment that stands idle. 

“70% of construction plant and machinery is hired in for specific periods for this reason. Government support needs to be designed around the way business is actually done not around the way HMRC still thinks it is done.”

BVRLA chief executive, Gerry Keaney, said: “The Government understands the important role that the vehicle leasing sector plays in delivering the UK’s road transport decarbonisation goals.

“This makes it all the more disappointing that leased vehicles have been omitted from the eligibility criteria of Super Deduction.

“This is a huge oversight, and an example of where the Government has failed to align its fiscal and environmental policies.

“An increasing number of individuals and businesses are turning to the leasing sector for cleaner vehicles, but the sector has not been immune to the impact of the COVID pandemic.

“With Clean Air Zones popping up around the UK, this is the perfect time to incentivise the uptake of low- and zero- emission vehicles and leasing enables businesses to keep their cash to help get them through the recovery period.

“Making leased vehicles eligible for Super Deduction would provide a boost to many businesses and would be a welcome shot in the arm for fleets.”