Company Car Tax
Leasing a vehicle has tax implications in the form of company car tax (Benefit-in-Kind, or BIK), which varies depending on the vehicle. To find out the level of tax on any individual vehicle speak to one of our expert team - we’ll be happy to talk you through the details.
Business Contract Hire
If a company is VAT registered, 50% of the VAT can be reclaimed on the finance rental. Additionally, if a vehicle is used exclusively for business, ie, a pool car that is parked at the company's premises overnight, it may be possible to reclaim 100% of the VAT on the finance agreement. If a maintenance contract is taken out as part of the finance agreement, it is also possible to reclaim 100% of the VAT on this element too.
There are also environmental benefits to consider. For example, if a vehicle has CO2 emissions of 160 g/km or less, 100% of the rental can be offset against Corporation Tax, whereas 85% of the rental can be offset against Corporation Tax for a vehicle with emission of 161 g/km or more.
Business Contract Purchase
Contract Purchase is treated by HMRC as a purchase. For all vehicles with a CO2 emissions of 160 g/km or less, the organisation may use the Writing Down Allowance of 20%, with this reducing to 10% if a vehicle has emissions greater than 160 g/km. Payments for depreciation and interest are not subject to VAT, making Contract Purchase more favourable for fleet users.
Taxation and Finance Lease
When it comes to tax, Finance Lease is treated in the same way as Business Contract Hire, ie, 50% of the VAT is reclaimable on the finance rental. Similarly 100% is reclaimable if the vehicle is exclusively for business.
Taxation and Outright Purchase
Outright purchase can effectively add 2.5% to a company's acquisition costs, as the VAT cannot be reclaimed. This, coupled with the CO2 emissions allowances, makes purchasing less attractive, with more and more companies opting for Business Contract Hire as a more viable option.
The one cost that you cannot avoid is that of fuel. A constant topic of debate, fuel prices can be extremely costly if the incorrect car is chosen to lease. At Carnoisseur Leasing, we can advise you on the best leasing options, based on your intended usage and mileage. For example, for the lowest fuel consumption, you may want to consider the eco-friendly range, or alternatively, hybrid and electric vehicles.