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Imminent Capital Allowance changes and how this will impact on your fleet

Posted on by Matt Topham

On 1st April 2013 changes to lease rental restriction thresholds will mean that the right choice of vehicle becomes more important than ever for your fleet. Ogilvie Fleet are here to help you make those right choices and give you a simple guide to the imminent changes ahead.

• The Lease Rental Restriction threshold will reduce from 160g/km CO2 to 130g/km CO2.

• Vehicles delivered after 01/04/13 with emissions greater than 130g/km will be less tax efficient as a direct result of the Government changes.

• Current vehicles on your fleet will not be affected.

• Fleet Managers should consider adopting the Ogilvie True Cost figure to benchmark their vehicle choice list.

When you lease a vehicle you can offset the cost of the finance element against any Corporation Tax that your business pays. However any car with CO2 emissions greater than 160g/km face a 15% permanent lease restriction, meaning that they can only deduct 85% of any finance rental payments from taxable income. When introduced in 2009, this restriction saw many businesses adopt an upper CO2 emissions limit of 160g/km on their car choice lists.

As of 1st April 2013 the government has reduced this Co2 threshold to 130g/km, thus meaning that the Lease Rental Restriction will affect many more vehicles. Thankfully, many manufacturers have been working towards these changes for some time. However, these changes, combined with the changes in emission threshold at which the 100% first-year allowance can be claimed, from 110g/km to 95g/km, could result in an increase in net leasing costs. We have amended our quotation systems to now reflect this as we believe that the majority of vehicles to be ordered now will likely be delivered after the changes come in to effect on 1st April 2013.

Of course, should you order a vehicle that sits between 131g/km and 160g/km, and can be delivered before April 1st, we wouldn’t need to apply these changes. In those circumstances your Area Manager or Customer Service Executive will speak with you about available options. It may well be the case that some flexibility with vehicle choice could result in a speedier delivery and a lower net cost to you.

How To SafeGuard Against Similar Future Legislative Changes?

Implementing a sub 131g/km Co2 policy from now onwards will mitigate the changes that have described above and should be immediately considered in our opinion. However, it will not mitigate against any future similar legislative changes. The use of Ogilvie True Cost to benchmark your company car policy will, none the less, assist you in mitigating the financial effect of any future changes. Ogilvie True Costs highlights the TRUE operating cost of lease vehicles and includes Lease Rental Restriction in the calculations. Thus, any changes to legislation are immediately taken into account in your choice lists and your company is better protected against rising costs, effectively future proofing your company car choice list. Ogilvie True Cost is, quite simply, the benchmark by which all fleet policies should be based.

For this or more information about Lease Rental Restriction and how we can help you reduce your fleet operating costs, please contact your Area manager.

Ogilvie Fleet is a registered company in Scotland with company number SC067027
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