With Business Contract Hire (BCH), your company can offset up to 100% of the monthly lease payments against its Corporation Tax bill. Additionally, VAT-registered companies can typically reclaim 50% of the VAT on the finance rental (and 100% on the maintenance element).
Key tax benefits for Business Contract Hire include:
- Corporation Tax: Monthly rentals can be written off as a business expense, lowering your taxable profits.
- Electric and Ultra-Low Emission Cars: For vehicles emitting 50g/km of CO₂ or less, you can claim 100% of the lease payments against Corporation Tax.
- Higher Emission Cars: For cars emitting over 50g/km, the allowable deduction is restricted to 85% of the monthly rental cost.
- VAT Relief: If your company is VAT registered, you can recover 50% of the VAT paid on the finance element of the car lease (to account for any personal use). If the vehicle is used exclusively for business (such as a pool car kept at the business premises overnight), you can reclaim 100% of the VAT.
- Maintenance Packages: If you include a servicing and maintenance package in your contract, you can usually claim back 100% of the VAT on this specific portion.
- Road Tax: Vehicle excise duty (road tax) is typically included in the monthly lease and is administered by the finance company.