Industry bodies call for Chancellor to revisit leasing Super Deduction Allowance omission

The BVRLA and six other leading trade associations have written to the Chancellor, highlighting leasing industry concerns about restrictions on the eligibility criteria for the 130% super deduction allowance (SDA) announced in the spring Budget. The group pointed out that these fail to include leasing and short-term hire – two of the most common ways that businesses acquire new plant and machinery.

As a result, only businesses that purchase new commercial vehicles or equipment outright can access the allowance – despite the fact that thousands of companies rely on leasing and rental to finance these acquisitions.

The SDA was introduced on 1 April 2021 to stimulate a post-pandemic recovery in the UK economy. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim a 130% super-deduction capital allowance on qualifying plant and machinery investments, and a 50% first-year allowance for qualifying special rate assets.

Government documents list examples of qualifying assets as including solar panels, computer equipment and servers, tractors, lorries, vans, ladders, drills, crane, office chairs and desks, electric vehicle charge points, refrigeration units, compressors, and foundry equipment. However, the guidance makes it clear that assets held for leasing are not eligible.

The associations have written to the Chancellor pointing out that in the commercial vehicle sector, 1-in-5 trucks and 1-in-6 vans on UK roads are rented or leased, so the decision to omit leasing from the SDA has a significant impact on the sector at a time when the government is encouraging investment in new drivetrain technology.

Gerry Keaney, BVRLA CEO, said: “With the UK economy still emerging from the impact of the COVID pandemic, the Government is urging fleets to spend billions of pounds on new ultra-low emission commercial vehicles.

“A huge proportion of this investment will be made through vehicle leasing and rental, which provides businesses with the fixed cost and flexibility they need to continue decarbonising.

“The eligibility restrictions on the super deduction mean that this tax incentive is not open to business for whom leasing or rental are the best options.”

A range of industry bodies from across the tax, logistics, construction, manufacturing and small businesses sectors have called for the extension of the SDA criteria to include short-term hire and leasing. They include the Finance and Leasing Association, Civil Engineering Contractors Association, Forum of Private Business, Logistics UK, Manufacturing Technologies Association, and the Association of Chartered Certified Accountants.