Car Leasing & Contract Hire

Contract Hire or Car Leasing / Finance Lease

Rental or 'Non-Ownership' Options

Leasing or contract hiring a vehicle are essentially the same form of car finance. These finance options are often referred to as "use without ownership". Title to the motor cars can never be passed to lessor, user or hirer, by the lessee, owner, and usually the finance provider. Because the hiring of motor cars is a service all the rentals payable under these agreements are subject to VAT at standard rate. Only 50% of the VAT on the finance element of the rental can be reclaimed. All the vehicle on non-qualifying motor cars, margin motor cars, and on any maintenance element can be reclaimed.

For accounting purposes the rentals payable under these agreements will be shown on the company's profit and loss account as an expenditure item. In the cases where the capital cost of the vehicle exceeds £12,000.00 only a percentage of the rental can be reclaimed. Vehicles subject to contract hire (also referred to as Operating Leases) agreement cannot be shown as an asset on the company's balance sheet though liabilities under such Agreements must be declared in the company's Accounts. Vehicles subject to Finance leases are shown on the company's balance sheet and the agreement shown as part of the Company's Liabilities, the same as for Purchase Agreements, in accordance with SSAP 21. ( Standard Accountancy Practices ).

For regulated agreements under the CCA the total rentals including VAT must be under £25,000.00, and the hirer must not be a Local Authority, or Limited Company, i.e. a Sole Trader or Partnership. For those regulated Agreements the hirer will enjoy the same rights as hires of "Purchase Options".

For further advice on any aspect of leasing a car, please call us on 01952 288370 or use our contact form here.