About contract hire

About contract hire

05 January 2012
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ABOUT CONTRACT HIRE

One of the most popular options, used by businesses in the UK fleet vehicle area. New or used vehicles can be used (up to 12 months old). Paid for, by fixed a monthly payment which makes life easier for budgeting. Even the amount of administration can now be reduced by an option called ‘Fleet Management Services’. Some highlights include:

Businesses that are VAT registered are allowed to claim 50% of the VAT part of the monthly rental amount.

Plus 100% of the VAT on maintenance charges.

For commercial users 100% of the monthly rental amount can be claimed. (But the owner must prove that the vehicle is never used for private use).

Again with to the above, a 100% of the VAT on maintenance charges.

Net rental income can also be claimed when put against taxable profits. (Your accountant should be able to guide on this, reference any proportion regarding private mileage)

When providing for an employee - Be aware they will have a ‘benefit in kind tax’ on the CO2 emissions of the vehicle.

Contracts periods run from 24 to 60 months, at a fixed rate based on the vehicles value.

There is commonly an agreed mileage amount which if exceeded will incur charges. (Note this is calculated over the period of the entire contract)

Maintenance and servicing costs can be included, but this can work out to be very expensive.

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