Frequently Asked Questions
What are the tax benefits of business contract hire?
There are a few tax and VAT advantages when leasing a car through your business:
The monthly payment can be offset against taxable profits. How much depends on the CO2 emissions of your chosen car - if your car emits CO2 emissions of 110g/km or less, the full net monthly lease cost can be offset; if your car’s CO2 emissions exceed 110g/km 85% of the net monthly lease cost can be offset.
A car on contract hire is classed as "off balance sheet", which means it isn’t sitting on the books as a depreciating asset.
If your business is VAT registered you can reclaim 100% of the VAT on the monthly rental cost if the car is used exclusively for business. You can also reclaim 50% of the VAT if the car is also used personally and 100% of the VAT on a maintenance package, if you have added one to your contract hire agreement.
If you are self-employed as a sole trader, partner or an LLP member you won’t have to pay company car tax.
If your business is not VAT registered you’re still eligible for contract hire. You simply pay the VAT on the monthly rental cost.
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