Super Deduction will not ensure growth in its current form

The Finance & Leasing Association (FLA) and the British Vehicle Rental and Leasing Association (BVRLA) have asked the Government to amend the Super Deduction initiative to boost investment in plant and machinery by extending it to include leasing and plant hire – two of the most common ways that these assets are acquired by businesses.

Super DeductionIn letters to Government Ministers, both trade associations have welcomed the aim of Super Deduction – its allowance of 130% on new plant and machinery investments that would normally qualify for only an 18% allowance will certainly make some investment more attractive. However, at a time when some businesses can ill-afford to make large capital expenditures, leasing or short-term hire are particularly attractive routes to acquiring newer and more productive plant and machinery. For others, these options make good business sense because the assets will only be used for limited periods or need to be updated regularly.

Expanding the scope of Super Deduction to include leasing and plant hire would benefit a much broader range of businesses and stimulate growth across all sectors – which is exactly what the recovery requires.

Stephen Haddrill, Director General of the FLA said: “The Government’s decision to restrict the scope of the super deduction amounts to a serious missed opportunity to boost investment. The idea that businesses grow and become more productive by buying plant and machinery outright is out-dated. Leasing and hire make far more sense.

“It preserves cash in the business and can avoid having expensive equipment that stands idle.  70% of construction plant and machinery is hired in for specific periods for this reason. Government support needs to be designed around the way business is actually done not around the way HMRC still thinks it is done.”

Gerry Keaney, Chief Executive of the BVRLA said: “The Government understands the important role that the vehicle leasing sector plays in delivering the UK’s road transport decarbonisation goals. This makes it all the more disappointing that leased vehicles have been omitted from the eligibility criteria of Super Deduction. This is a huge oversight, and an example of where the Government has failed to align its fiscal and environmental policies.

“An increasing number of individuals and businesses are turning to the leasing sector for cleaner vehicles, but the sector has not been immune to the impact of the Covid pandemic. With Clean Air Zones popping up around the UK, this is the perfect time to incentivise the uptake of low- and zero- emission vehicles and leasing enables businesses to keep their cash to help get them through the recovery period. Making leased vehicles eligible for Super Deduction would provide a boost to many businesses and would be a welcome shot in the arm for fleets.”

The FLA and BVRLA joint briefing paper on Super Deduction can be found here

Government guidence on Super Deduction can be found here.

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