The reduction of VAT to 15% from 01 December 2008 will make personal contract hire (PCH) leases cheaper.
PCH leases benefit because the VAT is included in the monthly lease rental.
The VAT reduction was announced by the Chancellor today. It was part of the Pre Budget Report (PBR).
The VAT reduction will last from 01 December 2008 to 31 December 2009. For 2010 it will revert to 17.5%.
“This is great news for small businesses that use personal contract hire. Effectively they have been given a 2.5% reduction in the rate,” commented Robert Wastell, managing director, CompareContractHire.com.
For business leases using contract hire there is also a benefit. There is currently a restriction on 50% of the VAT on most contract hire monthly leases. The rate reduction means a 1.25% benefit.
Less welcome is the news that the proposed fuel duty rise – 2p per litre – will go ahead from 01 December 2008. This follows the fall in pump prices of 20p per litre from their summer peaks.
The 13 band VED system – road tax bands – will be introduced from April 2009. But the changes are being phased in with only a £5 increase. The ‘showroom tax’ is delayed until 2010.
“Significant is the plan to delay the rises in Vehicle Excise Duty to 2010 and to reduce the size of the increases when they are introduced. This was always a blunt instrument to tackle green issues,” commented Tony Ganon, commercial director, BCA.
“With greater flexibility from the lenders, we expect to see some renewed confidence in new car sales and a knock-on pull-through to used car sales too.”
Further comment on the Pre Budget Report
If you wish to read further opinion on how the Pre Budget Report will affect your business car motoring, then go to the Editor’s Blog So how was the Pre Budget Report for you? VAT reduction will benefit personal leases