factsheet.html

VAT: A VAT registered business can reclaim 100% of the VAT levied on the commercial vehicle cost, or the rentals, if it is on a lease/contract hire agreement. If you buy, or finance, a NEW car/estate car as a VAT registered business, you can only reclaim the VAT in special circumstances. A "pool car" used only for business qualifies for this, as do taxis, driving school, daily rental, accident management or body shop loan cars. A USED car must be VAT qualifying for VAT to be reclaimable out of its cost. For non VAT registered businesses, the VAT becomes part of the vehicle cost and is offset against pre-tax profits. If a VAT registered business leases, or contract hires a car it can reclaim 100% of the rental VAT if in any category, as above, or reclaim 50% of the VAT on the rentals if the car has some private use, the other 50% of the VAT being added to the rental cost and offset against pre-tax profits (you can still reclaim 100% of the VAT levied on the maintenance element of a rental). If you are not a VAT registered business, all the VAT is added to the rental cost for tax relief. [The above assumes a car is VAT qualifying, meaning the VAT content of its cost price can be removed before a lease rental is calculated. If a used car is not VAT qualifying, the VAT on the higher rentals is fully reclaimable if VAT registered. VAT qualifying cars are a better choice for lease or contract hire]. TAX: On a commercial vehicle you purchase/finance the write down is 50% of cost in year one and 25% of the reducing balance yearly thereafter, with yearly interest costs being tax deductible. Lease or contract hire a commercial vehicle and you can offset ALL rentals against your pre-tax profits EVERY YEAR! The personal "benefit in kind" tax for private "regular" use of a company commercial is a reduction in your tax code allowances of £3000 [or £3500 if you get free fuel for private mileage]. Occasional private use of a company commercial is not classed as a "benefit in kind". A purchased/financed company car has a write down allowance of 25% of the reducing balance each year, up to a maximum of £3,000 in any one year ( plus any apportioned interest cost). If leased/contract hired, the write down on rentals paid each year is 100% on cars P11D priced up to £12,000 and an apportioned amount of the rentals on cars costing above this, based on vehicle cost, making these schemes more tax efficient than outright purchase/finance. The "benefit in kind" tax coding is based on the P11D price AND the exhaust emission figure, making a diesel model a good bet in most cases. [This system could be about to change] FUNDING OPTIONS: Outright purchase or finance: Owned when fully paid up (incl. option to purchase fee on HP). Maintenance, road tax and future values are your responsibility. Tax allowances as above if you are in business. (N.B. tax allowances may be influenced by the amount of private use of a vehicle). Lease Purchase: Despite its name, this is a finance agreement and has a final "balloon" lump sum payment deferred to the end of the agreement upon which you only pay interest throughout the term thus reducing monthly repayments. You get 100% of the resale value after the agreement is paid up in full, including the balloon. Treat as a finance agreement for tax if a business. Finance Lease: Despite its name, this is a lease agreement. Bearing in mind it is the rentals you offset against your pre-tax profits, you can have either a fully amortised lease (no balloon), or a balloon payment lease with a lower rental. This balloon can be varied up to a maximum safe figure in line with your mileage, term and use to obtain a comfortable monthly rental. As you get a refund of the final sale proceeds (95% +/-) you risk nothing by having a higher, affordable monthly rental whilst enjoying better tax relief throughout the agreement on a car.(it being 100% on commercials) Contract Hire/ Personal Contract Hire:(with, or without maintenance[relief vehicle optional]) You pick the term and mileage required and they have the vehicle back at the end of the contract. Only excess mileage or unacceptable damage is chargeable, they take the risk of the future value (win or lose!).With full maintenance you only have the fuel, insurance and abused tyres to cover. Contract Purchase/ Personal Contract Purchase:(with/without maintenance[relief car optional]). This is a finance agreement with a buyback (guaranteed future value) based on term and mileage. Excess mileage and unacceptable damage is chargeable if you hand the car back. End of contract gives you three options: 1) You buy the car for the G.F.V. 2) You part exchange the car, with any profit after the G.F.V. is paid being available to you. 3) You simply give the car back.You choose!

FACT SHEET

`FACT SHEET`