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Using Business Lease and Contract Hire For Company Cars

Using Business Lease and Contract Hire For Company Cars
28th June 2013 Run Your Fleet Blog

Company Vehicles Fleet Management


Lease & Contract Hire Benefits For Fleets


How you finance your company cars can be a big issue for Fleet Managers. What benefits are there to using business lease or contract hire for company vehicle fleets?

Business Lease – Contract Hire

For business fleet managers, company vehicle leasing has many benefits

  • Tax efficiency due to the leasing payments being tax-allowable expenses. There are also savings to be made on VAT, the rate depending on whether the vehicle is used exclusively for business or not
  • Car leasing does not appear on the balance sheet

Company Car Tax

From the HMRC page on company cars

If you make a car available to your employees and it is available for private use (including commuting), your employees have to pay tax on the benefit of this. In the same way, they have to pay tax if you provide free or subsidised fuel for private use in that car.

Where these benefits are taxable, employers and other providers (but not employees) are liable to pay Class 1A NICs.

In general, the benefit charge is lower for cleaner and cheaper cars. This is to encourage you and your employees to choose cars which are less damaging to the environment.

Benefits for Company Fleets

With the low deposit and fixed monthly sum payable to lease a vehicle, leasing is very budget friendly,  It helps to manage cash flow, and if the deal also includes running costs and maintenance then businesses can also reduce fleet administration costs.

Business Contract Hire

As our Contract Hire website says;

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.

What benefits has contract hire brought to your company vehicle fleet?





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