Replacing the current Super-Deduction tax break with an enhanced scheme that also includes rental and leasing could help drive the net zero transition, according to major UK trade associations.

The groups have called for an enhanced scheme that also includes rental and leasing

Introduced in the 2021 Budget, the Super-Deduction programme currently allows companies to claim 130% capital allowances on qualifying plant and machinery investments.

But ahead of the scheme ending in March, eight leading trade associations have written to the Chancellor, recommending that a new Green Super-Deduction replaces the existing programme – and extends it to leasing and short-term hire.

The groups, which include the BVRLA, Logistics UK and Finance & Leasing Association (FLA), say it’s a major flaw of the current scheme that it is not available for leasing or short-term hire, as many firms choose these options because it makes good business sense.

And they’ve recommended the Chancellor implement a Green Super-Deduction to replace existing allowances for green plant and machinery, such as the 100% first year allowance (FYA) for electric vehicle charging points and electric vans, and the 50% FYA for plant and machinery which supports a business’s energy efficiency. This would deliver simplicity for businesses, especially SMEs, which may otherwise not use capital allowances.

Toby Poston, BVRLA director of corporate affairs, said: “The leasing and rental exclusion in the current regime has created an unfair playing field that is hindering SMEs from making the leap to zero-emission commercial vehicles. The enhanced allowances we’re recommending would boost business investment in zero emission technology and support the Government’s ambitious phase-out targets.”

Simon Goldie, director of business at the FLA, added: “Net zero preparations are no longer the preserve of large firms with big budgets. Green investment is now a competitive issue for firms of all sizes because those credentials matter to suppliers, partners and customers.

“It’s vital that a Green Super-Deduction is put in place to help SMEs, but it also has to be a programme that allows businesses to choose the right funding option for their investment and their circumstances. Leasing and short-term hire are key to the funding mix, and any Super-Deduction that does not include them is flawed by design.”

The importance of such a programme for the logistics sector has also been emphasised.

Logistics UK’s senior policy manager Denise Beedell said: “Logistics businesses are keen to decarbonise their fleets to meet net zero targets, however, they are already facing a 12.6% rise in vehicle operating costs, a reduction in energy support and a potential 23% increase in fuel duty. The creation of the suggested Green Super-Deduction would provide much needed financial support and encourage greater investment in zero-emission technologies.”

Other signatories to the letter are CECA, EAMA, Forum of Private Business, Make UK and MTA.