'No logic' to cuts in capital allowance rules, says BVRLA chief executive

The British Vehicle Rental and Leasing Association (BVRLA) is calling for the changes in capital allowance rules on low emission company cars to be reversed, with chief executive, John Lewis, believing there is 'no logicî in removing the ability of leasing industries to claim the full write-down on low emission cars they acquire and subsequently lease to fleets. In the changes contained in the 2013 Finance Bill, the emissions threshold at which company cars are eligible for the 100 per cent first-year write-down allowance was reduced from 110g/km to 95g/km. However, leasing companies would no longer be eligible for the full write-down on low emission cars, in subsequent years, with a tax relief set at the 18 per cent main rate. Lewis said: "By removing the ability of the leasing industry to claim these allowances, the Government will just make it more expensive for businesses to run greener fleets. There is no logic to it." With hire car companies expected to reflect the impact of reduced tax relief, the cost of monthly rental rates will inevitably increase in the coming months. While some leasing companies are already making the move, with company cars ordered today unlikely to be delivered until after the April 1st threshold, there are apparent exceptions to the rule. Gary Killeen, fleet services commercial leader for GE Capital UK, said: "Leasing companies may not have to automatically pass on all of the increased cost to customers and there will be variances from model to model." Killeen used an example of a Volkswagen Golf 2.0 TDI SE with CO2 emissions of 106kg/km, which would not be affected by the capital allowance change post-April 1st. "This is a specific example where we have been able to hold rates." The challenge facing all leasing companies is whether to choose to absorb the costs and not pass it on through increased rates, or to find the right time to pass it on. The impact of the tax change will undoubtedly vary from model to model, with leasing firms' interpretation of the measure on any car varying due to a number of factors including their own funding costs and interest rates. But if figures are to be believed, the removal of the 100 per cent tax relief for leasing companies will result in an approximate increase of £5-£12 a month on rental rates per fleet vehicle.