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Contract Hire

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Under Contract Hire, the vehicle continues to be owned by the vehicle funder and is hired to you for a set period of time and at a fixed monthly rate. This method of finance can be useful for companies wanting to free up credit lines or improve cash flow by implementing fixed cost fleet operation.

The contract will usually include Vehicle Road Fund Licence for the length of the contract, and you can also optionally include all service, maintenance and tyres.

VAT is charged on all of your payments, VAT registered businesses are usually able to claim back 50% of the VAT on vehicles, 100% of the VAT on optional maintenance contracts.

As the vehicle is never owned by your company the vehicle does not appear on your balance sheet, you therefore do not have to deprecate it but your rentals are deductible against corporation tax.

Currently rentals paid on vehicles with Co2 emissions up to 160 g/km are fully deductible against corporation tax. However, for vehicles with emissions above 160g/km there is a disallowance of 15%.

Benefits of Contract Hire

  • Fixed Monthly Payments
  • No Depreciation Risk
  • Freeing up of Capital
  • Claiming VAT
  • Off Balance Sheet Funding
  • Option to Protect Against Service & Maintenance Costs 

Want to know more?

To find out more information on Contract Hire and how your business can benefit contact us today for friendly advice.