The British Vehicle Rental Leasing Association warned billions of pounds would be added to the balance sheets of leasing companies and damage important investor ratios such as return on capital employed. An ASB discussion paper will be launched later this year and will spark a war of words with an industry reeling from a European Court defeat this week over whether it can recover up to £15bn in VAT. The ASB has argued that car leasing companies are trying to keep leases off the balance sheet in order to keep liabilities down. But Lex Vehicle Leasing business development director Andy Marchington angrily denied this was the case. 'Perhaps the ASB is 20 years out of date,' he said. 'The majority of contract-hire business written here today is for a full operating lease which offers a complete support package.' TNT managing director Alan Jones said putting operating leases on the balance sheet would inflate both liabilities and assets, giving a misleading picture of a company's finances. The ASB move follows a recent G4+1 standards-setters meeting in Dublin marking the launch of a worldwide assault on accounting for leases. ASB technical director Allan Cook said the paper would overhaul the current rules for accounting for leases. 'There is a formula for deciding what is a financial lease (which stays on the balance sheet) and an operating lease (off balance sheet), but people have been getting round this,' he said. In a separate blow to the industry, the European Court ruled the UK government need not relax the laws restricting VAT recovery on cars. Customs & Excise had been warned that had it lost the protracted dispute with leasing companies, the government would have to refund up to £15bn in overpaid VAT. Four companies - Allied Domecq, Royscot Leasing, Royscot Industrial Leasing and TC Harrison Group - led the legal action, but many other companies lodged substantial claims dating back to the inception of VAT in 1973.
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