Assuming some home to office use of the vehicle, are there any VAT benefits of Contract Hire?
Yes. Following the VAT changes of 1 August 1995 Contract Hire has become even more desirable and more popular. There were three major changes. 1. Businesses can recover the VAT payable on the purchase of cars only if they are wholly for business use. Remember that even a single mile of home-to-office travel means that the vehicle does not qualify as “wholly for business use”. 2. The financiers are able to recover all VAT payable on vehicles purchased, as they are purchased wholly for business use, regardless of the customer’s use of the vehicle! This is where the major cost savings lie. 3. There is a 50% restriction for business on the recoverable VAT on leasing payments (not the maintenance element, which is still 100% recoverable, unless the car is wholly for business use). Whilst reducing the benefit slightly for the customer, the overall savings made are significant for Contract Hire.
