Raise VAT recovery rate, says BVRLA

Published by Motor Finance and Leasing Life


The British Vehicle Rental and Leasing Association (BVRLA) has called for the current VAT recovery rate of 50 percent on leased fleets to be raised, and has accused HM Revenue & Customs (HMRC) of ignoring its advice.



A recovery rate of 70 percent would more accurately reflect actual business mileage, according to figures compiled by BVRLA. The overpayment is estimated to amount to £300m a year.



BVRLA’s figures take account of data from more than 120,000 drivers covering nearly 2.5bn miles. They show that leased fleet vehicles have been 70 percent used for business for at least three years.

John Lewis, BVRLA chief executive, wrote in a letter to HMRC: “HMRC has chosen to ignore the very robust data we provided in favour of a much smaller sample of 418 drivers based on an anecdotal survey conducted by the Department for Transport, which conveniently backs its own position.”



BVRLA has accused HMRC of ignoring its advice despite having been asked for input. “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,” said Lewis.



A spokesman for HMRC said: “We have not rejected the BVRLA’s call to increase the VAT recovery for leased cars. However there have been a number of factors to consider and we have not been able to conclude our discussions with BVRLA in time to meet the very tight deadlines for renewing the current derogation, which runs out at the end of this year.

"The current recovery rate of 50 percent broadly reflects the business use of leased vehicles across all sectors and therefore continued use of this rate will not have a significant impact on the amount of VAT that UK taxpayers are required to pay. We will continue to work with the BVRLA and our joint findings will be used to inform future derogation renewals.”