FLEETS have been urged to drop their claims to recover billions of pounds of VAT paid on company cars. The calls followed a ruling in the European Court of Justice which appeared to signal the end of any realistic chance of victory for the fleet industry in its campaign to reclaim VAT on cars bought for business.

As many as 5,000 companies are thought to have lodged back-dated VAT claims with Customs & Excise, lining up behind TC Harrison, RoyScot Leasing and Allied Domecq which have taken their case to the ECJ. While the case should be judged on legal and fiscal grounds, there is no escaping its highly political nature, with up to £26 billion riding on the verdict.

Norman Donkin, director general of the British Vehicle Rental & Leasing Association, said the three appellants' chances of victory now looked to be completely dead. 'Most companies will leave their claims in place as a precaution, but there seems no chance of success. If they succeeded in their claims the Government would have to recover the money in some way, so there would be an enormous increase in taxation aimed at company cars,' he said.

Colin McLean, chairman of the BVRLA and managing director of Highway Vehicle Management said: 'Our industry has to accept that we had a great victory when we achieved a level playing field in 1995, and we should be satisfied with that.'