Benefits of Business Contract Hire (BCH)

Cash Flow & Balance Sheet Improved -

Buying a car outright can see your cash flow take a big hit. On the balance sheet, this would stand out as a large liability and could also affect your ability to secure more lines of credit if needed.

However, leasing a car or van often requires far less money to be spent upfront and allows you to budget for a fixed cost across a pre-agreed period of time.

This means not only will the balance sheet looks healthier, due to the funder remaining to be the owner of the vehicle, but your cash flow will not be stretched by paying out tens of thousands of pounds. It frees up the money that would’ve been spent on buying the car/van to be used on other important areas of the business to help it grow.

All Costs in One payment-

Taking out a business lease means paying one fixed monthly cost for your fleet. Business leases cover the cost of the car and road tax. For an additional charge, you can also get maintenance, insurance and breakdown cover to complete the package.

This helps to manage cash flow and budgeting better and covers all your motoring needs under one charge.

Avoid Depreciating Assets-

Finding the money needed to pay for a brand-new vehicle or even that of a second hand vehicle, can be difficult enough. But it’s even more disconcerting that the value of the vehicle will only ever go down, which means when you come to sell it, you never reclaim its real worth.

The money you pay each month for a business car lease factors in the depreciation of the vehicle for the duration of the contract. This is why it can be cheaper than buying. Plus, the fixed cost you are paying is a fair reflection of the asset you receive.

Once the contract is over, you can simply walk away or order a new lease car without the stress of dealing with selling and recouping your money. Again, this avoids any risk of negative equity.

Safer Vehicle Technology-

If you can’t afford to buy a business vehicle outright, you may be tempted to look for a second-hand car as an alternative. In terms of cost, this can have advantages depending on how much you can afford, but you may not be able to provide a car to staff members that include the latest safety features.

A new car is more likely to have extra safety features than an older vehicle, plus all lease cars come with a manufacturer’s warranty, too, for extra peace of mind.

Reclaim Costs Through Corporation Tax-

Limited companies are able to offset up to 100% of the payments and VAT against their corporation tax if used solely for business purposes. In addition, by taking out a maintenance package with a company car, you can claim everything back on that too.

When it comes to car emissions, any car you lease that releases less than 110g/km allows you to claim back 100% against your income. Cars emitting 111g/km or more are able to claim 85%. If you have leased a van instead of a car, then you can claim 100% regardless of the emission rate.

Claiming the VAT back-

In most cases, 50% of the VAT on a car lease payment for a Business Contract Hire vehicle can be reclaimed if your company is VAT registered. This figure takes into account any personal use. So, if the car is solely used for business purposes, you can claim up to 100% VAT back on the initial rental and monthly instalments.

Employee Company Car-

Providing a company car is a fabulous way to improve the benefits package for your employees. Business leasing is an easy way to manage this perk, and the benefit your employees receive incurs a Benefit in Kind (BIK) tax.

This tax amount depends on the car model and emissions value, and HMRC determines the rates. But, opting for a zero or low-emissions car comes at a lower tax rate and could be a handy benefit for eligible staff.