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CONTRACT HIRE
Introduction
The hirer enjoys all the benefits of vehicle use,
whilst legal ownership is retained by the contract
hire company. Sometimes called an “Operating
Lease”, rentals can include maintenance costs.
How it works
Advanced rental is paid upon delivery and monthly
rentals are payable over an agreed period. On conclusion
of the agreement, the vehicle is returned to the
contract hire company.
Benefits
• Offers tax benefits for some companies
• Low initial outlay - usually 3 - 6 months
rentals in advance
• Rentals do not appear on balance sheet
• Releases cash flow
• Tailored rentals for easy budgeting
• Can include maintenance charges for a total
package with no hidden costs
Disadvantages
• Mileage restriction
• No residual value realised
Business Tax
As you do not have ownership of the vehicle you
cannot claim the “Written Down Allowance”.
Instead, you are able to offset up to 100% of lease
rentals against your taxable profit, thus reducing
your tax liability. For cars with a retail price
over £12,000, tax relief is restricted with
a diminishing proportion of rentals being offset.
VAT Implications
As the Lease company can reclaim all the VAT on
the vehicle, rentals are calculated on the VAT exclusive
price. The rentals attract VAT, of which generally
50% is reclaimable.
This information is correct
at time of publication December 2006.
Platinum is a part
of Renrod Ltd.
Renrod Ltd is authorised and regulated by the Financial
Services Authority. Please ask for full terms and
conditions.
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