An extension to full expensing announced by the UK Government gives fleets an ideal opportunity to replace vans that have been continually extended following the pandemic, according to Fleetcheck.

The software firm’s managing director, Peter Golding, explained that measures announced in last month’s Autumn Statement meant fleets that outright purchase vans, either from cash or using hire purchase, could save substantially on their tax bills.

Golding said: “The government made two key announcements to encourage business spending. The Annual Investment Allowance was extended, meaning you can claim 100% tax relief on the purchase of second hand and new plant and machinery – including vans – up to £1 million per annum.

“An accompanying extension to full expensing gives an uncapped amount of tax relief on plant and machinery expenditure, so long as it is brand new and unused, with vans again qualifying. 

“What this means is that a fleet that spends, for example, £400,000 on vans should receive £100,000 off a corporation tax bill for a company paying at the current 25% rate.”

Golding said that many fleets were now operating vans that had been extended several times, and should ideally be replaced.

He said: “As is widely known, the pandemic threw van replacement cycles into disarray. Fleets that operated vehicles for perhaps typically five years now often have eight-year-old examples on their books. 

“These vans are tired, often fail, and are expensive to keep on the road. There are even sometimes questions over their safety.

“What the new government initiatives provide is an ideal moment to replace these vehicles. Supply of vans, which has been a major disincentive, has improved and both diesel and electric models are available in reasonable timescales.

“The financial and operational imperatives for replacement have aligned in our view, and fleets should give serious consideration to taking advantage of the new rules.”