Super deduction must include leasing and short-term hire

31 August 2021

The Finance & Leasing Association and six other trade associations have written to the Chancellor to express their concern that the eligibility criteria for the super deduction allowance (SDA) have not been extended to include leasing and short-term hire – two of the most common ways that businesses acquire new plant and machinery. 

This means that the SDA is only available to businesses that use cash or hire purchase to buy new plant and machinery outright – a practice that only a minority of firms would consider as it ties up cash and could result in expensive equipment sitting idle during quiet periods.

Leasing and short-term hire are efficient ways to acquire new and more productive plant and machinery because it provides access to the latest equipment for only as long as it’s needed.  

In 2019, £904m of new leasing business was written for plant and machinery assets. None of this investment by businesses would have benefitted from the deduction had the policy been in place at the time. In the construction industry where plant and machinery are often highly specialised, 70% of it is hired-in on a project-by-project basis. For commercial vehicles,1-in-5 trucks and 1-in-6 vans on the road are leased or rented.

Stephen Haddrill, Director General of the Finance & Leasing Association, said: 

“The era of buying plant and machinery outright is long gone. It’s so much more efficient for firms to lease or hire-in what they need when they need it, but the super deduction allowance simply does not support the realities of how modern businesses operate.

“The Chancellor has a real opportunity here to nurture productivity by getting the newest, cleanest and most efficient plant and machinery into the hands of business owners.”

The bodies joining our call for the SDA criteria to be extended include those representing of small businesses, accountancy and tax, logistics, construction and manufacturing sectors:

  • British Vehicle Rental & Leasing Association
  • Civil Engineering Contractors Association
  • Forum of Private Business
  • Logistics UK
  • Manufacturing Technologies Association
  • Association of Chartered Certified Accountants

Note to editors:

  1. The Finance & Leasing Association is the leading trade body for the asset, consumer and motor finance sectors in the UK. Our members include banks, subsidiaries of banks and building societies, the finance arms of leading retailers and manufacturing companies, and a range of independent firms.
  2. In 2020, FLA members provided £113 billion of new finance to UK businesses and households. £86 billion of this was in the form of consumer credit representing over a third of total new consumer credit written in the UK in 2020. £27 billion of finance was provided to businesses and the public sector. FLA members financed more than a third of UK investment in machinery, equipment and purchased software in the UK in 2020.
  3. For media enquiries, please contact the FLA press office on 020 7420 9656.

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