The impact of VAT in contract hire.
Nothing in this world is certain but death and taxes. Benjamin Franklin was sadly quite right when he said this, but perhaps a little pessimistic on taxes. They can not only be postponed, but avoided if you make sure you are making the right financial decisions for you or your company.
You may think you know how to do this, but if you’re new to car leasing then you do need to know how the taxman here in the UK looks at it.
If you’ve bought a car for your VAT-registered business before you will have noticed that you couldn’t claim back the VAT on the car. So cars are completely unlike your other business expenses, like the cost of input materials or operating costs, and are also not treated like your assets – whether short or long term assets. Doesn’t seem fair, does it? Especially when the price of a new vehicle is a major cost – that 17.5% addition to the total price of the car is substantial. You see, the Taxman, or Her Majesty’s Revenue and Customs as he’s known to his friends, simply doesn’t believe you when you say you’ve bought the car for business purposes. He assumes that there will be private usage, and probably most of the usage will be private, so he insists on treating your business like it’s an end consumer.
