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VAT Increase in the Budget Places Greater Focus on Contract Hire
The announcement that VAT will rise to 20% in 2011 will cause more businesses to look at the benefits of contract hire, according to the BVRLA (British Vehicle Rental and Leasing Association).
With leasing companies able to reclaim 100% VAT on vehicles they purchase, the benefits of contract hire become even stronger. And with contract hire already being the most popular form of vehicle funding for businesses, it looks likely that popularity will grow even further.
"Businesses who purchase their vehicles cannot reclaim the VAT if there is any element of private use" explained Phil Elms, Sandicliffe Motor Contracts' National Sales Manager. "This means the VAT increase will directly impact their costs. For example a car with a retail price of £20,000 will cost just over £400 more with the additional 2.5% added in.
"Contract hire, of course, is also affected beacuse there is only the ability to reclaim 50% of the VAT on the finance element. There are also implications of other aspects of the budget in terms of capital allowances.
"However,we feel it will certainly cause many businesses, and in particular those who have always outright purchased, to re-assess whether they are achieving the optimum financial approach."
For advice regarding the impact of the Budget on your fleet, please call Phil Elms on 01159 466 466 for a no obligation conversation or email phil.elms@motorcontracts.co.uk
<< show all articles
VAT Increase in the Budget Places Greater Focus on Contract Hire
The announcement that VAT will rise to 20% in 2011 will cause more businesses to look at the benefits of contract hire, according to the BVRLA (British Vehicle Rental and Leasing Association).
With leasing companies able to reclaim 100% VAT on vehicles they purchase, the benefits of contract hire become even stronger. And with contract hire already being the most popular form of vehicle funding for businesses, it looks likely that popularity will grow even further.
"Businesses who purchase their vehicles cannot reclaim the VAT if there is any element of private use" explained Phil Elms, Sandicliffe Motor Contracts' National Sales Manager. "This means the VAT increase will directly impact their costs. For example a car with a retail price of £20,000 will cost just over £400 more with the additional 2.5% added in.
"Contract hire, of course, is also affected beacuse there is only the ability to reclaim 50% of the VAT on the finance element. There are also implications of other aspects of the budget in terms of capital allowances.
"However,we feel it will certainly cause many businesses, and in particular those who have always outright purchased, to re-assess whether they are achieving the optimum financial approach."
For advice regarding the impact of the Budget on your fleet, please call Phil Elms on 01159 466 466 for a no obligation conversation or email phil.elms@motorcontracts.co.uk