Significant Tax Overhaul Affecting UK Fleet and Leasing Enterprises
The UK Government has announced plans to extend the full expensing policy, which currently offers a 100% first-year capital allowance for companies purchasing commercial vehicles, to the leasing sector. This move is expected to significantly boost investment in commercial vehicles, according to industry experts.
Under the new legislation, leasing companies will be able to offset the entire cost of new light and heavy commercial vehicles against their corporation tax. However, it's important to note that this benefit does not apply to cars. The Government has yet to provide a specific timeline for this realignment of tax policy, with the promise that it will be implemented "as soon as it is affordable."
The BVRLA, a UK vehicle leasing company representative, expects up to £1 billion of additional investment in commercial vehicles due to the extension of full expensing. Gerry Keaney, BVRLA Chief Executive, described this development as a "monumental step forward to rectify an historic injustice."
Caroline Sandall-Mansergh, Consultancy and Channels Development Manager at Alphabet GB, stated that businesses will see significant benefit in tax exemption through full expensing. She also expressed hope that the Government would provide further clarity on timelines for the extension of full expensing to the rental and leasing sectors.
Sandall-Mansergh also highlighted that the policy, known as full expensing, effectively cuts 25% (the main rate of corporation tax) off the cost of commercial vehicles for every pound invested. This means that businesses will be able to reduce their tax burden substantially when investing in new commercial vehicles.
The Government's spring budget for the coming year plans to publish draft legislation for full expensing to apply to leased assets. However, the draft laws for the application of full expensing on rented assets have not been explicitly dated, and the specific timing of their publication cannot be determined from the available information up to September 2025.
The extension of full expensing to the rental and leasing sectors is a welcome development for businesses, as it will provide them with a substantial tax incentive to invest in new commercial vehicles. It remains to be seen when the draft legislation will be published and when the policy will come into effect, but industry experts are optimistic about the potential benefits for businesses.
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