Business leasing eligibility and benefits

There are certain tax and VAT benefits that can help reduce costs for a company. This guide explains who is eligible for a business lease, as well as the benefits and information you will be asked to provide.

Benefits of a business lease

With a business lease, the company will be paying the monthly rentals, not the individual. For some businesses this may be the most cost-effective way to lease a car or van for the following reasons:

  • Fixed cost motoring - The cost of a new vehicle can be a huge initial outlay for a business. However, this is not the case with leasing, as rentals are monthly and the commitment will be known before signing the contract. This means that there is no enormous initial cost and the monthly rentals can be budgeted for. There is also an option for a maintenance package, so unexpected servicing costs are unlikely.
  • No depreciation worries - If you choose a contract hire agreement for your vehicle, it will be returned at the end of your lease. Because of this, you don't need to worry about reselling the vehicle or how much the value of the vehicle has depreciated.
  • Cash flow - A large amount of capital outlay is required to buy a brand new vehicle. With leasing, a business needs less of this capital.
  • VAT registered? - The cost of your business lease rental will be subject to VAT, but in some cases, you can claim up to 100% of the VAT back.
  • Corporation tax - You could save on corporation tax, depending on the emissions of your business vehicle. In some circumstances, part or all of your lease rentals can be reclaimed against your taxable profits.

The main attraction of a business lease is to reduce the whole life cost of any company vehicles which would not be possible if the vehicles were acquired through a personal lease. Contract Hire is currently 'off-balance sheet' which may benefit your company's accounts.

Leasing is generally accepted to be the most tax-efficient way of running your company vehicles. However, this is not the case for every business, and your Accountant would be able to advise you of the benefits a business lease based on your circumstances.

Eligibility for a business lease

To qualify for a business lease your company would need to be one of the following:

  • Sole Trader
  • Partnership
  • Limited Company
  • Limited Liability Partnership
  • Public Limited Company
  • Charity

Some other less common company arrangements could also be considered for a business lease. One of our Account Managers here at Rivervale will be able to advise you if your business will qualify.

Required information for a business lease

If you qualify for a business lease, you will be asked to provide information to enter into a business lease:

Company details:

  • Name
  • Address
  • Company registration number (if applicable)
  • Annual turnover

Director, partner or principal details:

  • Name
  • Date of birth
  • Marital status
  • Home address

Business bank details:

  • Bank name
  • Account number
  • Sort code

You may also be asked to supply additional information to support your application. This is likely to include:

  • Business bank statements
  • Management accounts
  • Filed accounting information

Where the hirer is a Limited Company, the director may also be asked to act as a guarantor. if the company is no longer able to pay monthly rentals, the director will need to make the repayments. The finance company may also ask for a higher initial payment to be made in some circumstances.

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