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.

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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.

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“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.”

Girish.gupta@vrlfinancialnews.com