The UK Government’s super-deduction initiative should be extended to cover leasing and plant hire, industry bodies have said.

The super-deduction was introduced in last month’s Budget, with a 130% allowance on new plant and machinery investments – including commercial vehicles.

However, the British Vehicle Rental and Leasing Association (BVRLA) and the Finance and Leasing Association (FLA) have argued that with some businesses short of cash for large capital purchases, leasing and hire deals should also be included in the scheme.

BVRLA chief executive Gerry Keaney 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.”

Keaney said that an increasing number of individuals and businesses were turning to the leasing sector for cleaner vehicles, but the sector was not immune to the impact of the Covid-19 pandemic. 

He added: “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.”

FLA director general Stephen Haddrill 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.”