Business Contract Hire is commonly referred to as vehicle lease and allows businesses a fixed payment method for the use of a vehicle for a term of normally between 12-48 months. The payments attract VAT of which for cars 50% and for commercial vehicles 100% of the finance element is reclaimable, 100% of the VAT for any maintenance payment is reclaimable. The rental payments are also classed as a true business expense so can be wholly offset against corporation tax. The benefits are fixed monthly payments with no disposal risk but reasonable care has to be taken of the vehicle and also there is an obligation to remain under the stated mileage at the contract inception or the finance company will levy a charge for loss of value.
The Contract Hire Company reclaims the VAT on the original purchase, which reduces your monthly rentals (which are + VAT). Contract Hire is a very popular choice for VAT registered companies as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use, no exempt turnover and not being on the Flat Rate VAT Scheme).
On contracts with maintenance the VAT on the service element is 100% recoverable. One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company. Another benefit of Contract Hire is that it is generally 'off balance sheet funding' (subject to legislation change) which means it can improve your gearing ratio (assets to borrowing ratio) and therefore possibly your borrowing ability in the future.
At Red Kite Leasing we have a vast range of car lease deals for businesses, helping you to find the perfect business contract hire deal. Contact us today for a quote and get a new car delivered directly to your driveway.
* All vehicle images and car descriptions on this site are for illustration and reference purposes only and are not necessarily an accurate representation of the vehicle on offer.
T: 01993 773514
Red Kite Leasing
Registered Office : 73 Newland, Witney, Oxfordshire, OX28 3JW
Red Kite Leasing are a credit broker and not a lender, we are authorised and regulated by the Financial Conduct Authority. Registered No : 820084
Registered in England & Wales with company number : 11524129 | Data Protection No : | VAT No : 329 9485 49
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