A Guide To Business Contract Hire

Leasing a vehicle or a fleet of vehicles for business purposes can be confusing, and the topic is rife with hearsay about tax initiatives and benefit-in-kind incentives. Whilst there is certainly a lot of talk about Business Contract Hire in the UK at the moment, we thought it would be good to provide some clarity.

Leasing a business vehicle can be quite a complex task, at Morgan Highfield & Land, we have over 20 years of experience in the field of prestige motor leasing. So we thought that we would share everything you need to know before you lease a vehicle from us or one of the UK’s many leasing companies.

With Morgan Highfield & Land, you can lease some of the most prestigious vehicles available worldwide. We even include some further incentives such as road tax and maintenance packages to help business owners like you make the whole process simple, easy and secure.

So, what do you need to know when you lease a vehicle through a Business Contract Hire Scheme?

When looking to lease a car for business purposes, you may want to consider:

• Finding your ideal car by searching through our stock list online.
• Picking the terms under which you will lease the vehicle (initial rental, lease length, trim and annual mileage).
• Undergoing a credit check to assess affordability and eligibility (VAT registered business, limited companies, private limited companies, or limited liability partnerships).
• Arranging a collection or delivery date.

Once the above is checked off you’ll be able to drive away in your new prestige vehicle from Morgan Highfield & Land. That’s all there really is to it. There are many potential benefits to leasing a vehicle over traditional vehicle ownership. In this article, we will assess everything there is to know about leasing Business Contract Hire (BCH), including tax incentives, who is responsible for insuring the leased vehicle, eligibility, and the pros and cons of BCH.

Business Contract Hire Explained

Business leasing, also known as Business Contract Hire (BCH), involves the long-term rental of a new car, van, or fleet of vehicles for a specified period, typically lasting between 24 and 60 months. Some major leasing companies such as Morgan Highfield & Land offer shorter loan periods of up to 84 days for some clients, too.

When selecting the vehicle, you determine the mileage allowance based on projected usage and then make fixed monthly payments throughout the contract. After the contract period is over, you can simply return the vehicle with no additional costs, provided that the car’s condition and mileage align with the agreement made at the beginning of the contract.

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Depending on your needs, affordability and personal preference, the choice of vehicle you lease is completely up to you and your company. Many luxury vehicles including Porsche, Audi and Land Rover are available through our BCH Scheme, allowing you to choose the vehicle that best suits your needs, without buying the vehicle outright.

Am I Eligible For Business Finance?

To be eligible for BCH, you need to be the owner, or working on behalf of of one of the following entities:

• A sole trader who has a bank account in their trading name.
• In a partnership.
• A limited Company.
• A Private Limited Company (PLC).
• A part of a Limited Liability Partnership (LLP).

If you own or work for one of the above types of business, and your business is still currently trading, then you may very well be eligible to lease a vehicle with us using a BCH scheme.

If you are unable to provide the leasing company with evidence of the above, you may also include:

• Business details, including name, address, revenue and Company Registration Number
• Company Director information, such as name, address and contact details
• Business banking details
• Bank statements
• A guarantee for monthly payments

Note: it may be necessary to have this information available when you speak with the finance company, so have it ready just in case.

So, Can a Business Lease Cars?

Yes, in essence, when a BCH contract is signed, it is a contract between the business and the finance company that has leased the car. The contract becomes an asset of the business, rather than the business owner, or the employee.

It is the business that is responsible for insuring the vehicle, and any payments made to the finance company. As such, the business ought to be eligible to claim up to 100% of the VAT for leasing the vehicle back. This is why the cost of BCH is often shown ex. VAT, whereas Personal Contract Hire deals are shown with VAT included.

Who is Responsible for Insuring a Leased Vehicle?

The company is responsible for leasing the vehicle. They must also include all named drivers on the insurance if the vehicle is being used by multiple members of the company.

In a business leasing arrangement, even though the vehicle is owned by the leasing provider, it is typically the responsibility of the business to ensure that the vehicle is insured comprehensively.

The insurance policy that covers the car should be the company’s motor vehicle insurance policy and must be in the company’s name. This means that the individual who drives the car will not necessarily need to have their own insurance. The company’s car insurance covers them to drive the leased vehicle.

They would only need private car insurance if they wish to drive another vehicle that they lease (or own) privately.

Who Owns The Lease Vehicle?

The ownership of the vehicle stays solely with the finance company. The business will never own the vehicle, nor will they be given the chance to purchase the lease vehicle at the end of the term. This is due to our leases being a part of a BCH scheme, rather than a Hire Purchase Agreement, which may offer the opportunity to purchase the vehicle at the end of the lease period.

Not owning the vehicle, and rather leasing through a BCH scheme means that the business never needs to buy one or more vehicles outright, freeing up business capital. It also allows the company to drive modern vehicles, which can be updated once their current lease period is up.

Every vehicle leased through us here at Morgan Highfield & Land is brand new, sometimes as little as a month old in some cases.

What are the Tax Incentives for Leasing a Car for Business?

Whilst tax incentives change regularly, the amount of tax that you may pay can vary depending on business status, and motor type, such as electric, diesel, petrol, or hybrid. The motor type matters as zero-emission vehicles can claim up to 100% of the VAT back, per UK law.

All-electric vehicles may claim a higher percentage of VAT back because they create zero tailpipe emissions.

Since 1995, companies that acquire cars through contract hire solely for business purposes are allowed to recover the VAT. If the vehicle is strictly used for business and has no private use, a VAT-registered business can reclaim 100% of the VAT paid on the finance element.

It should be noted that if your business plans to claim 100% of the VAT back, it may have to prove that the vehicle has been used solely for business purposes throughout the term. Typically, the business may only be able to claim 50% of the vehicle’s tax contributions back, due to the vehicle likely being used for personal journeys.

Admittedly, this is a grey area. In all instances, it would be worth speaking with your accountant or tax advisor before entering into a BCH to see how your business may be able to claim tax back from your lease. You can also speak with our team to see how we think you may be able to benefit from our lease scheme.

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Pros and Cons of a Business Contract Hire

Hiring a single or fleet of vehicles through a contact hire scheme is a great way to drive a brand-new, prestigious vehicle for work purposes, without breaking the bank. However, leasing a vehicle might not be right for every business in every situation. Let’s assess the pros and cons of leasing a business vehicle, to help you weigh up your options.

The Pros of Business Contract Hire

There are many positives for a business to choose to lease a vehicle through a Business Contract Hire scheme. This may include:

• Lower, predictable monthly costs when compared to buying the vehicle outright.
• Lower initial rental outlay than with traditional motor finance.
• No risk of depreciation as you will never own the vehicle outright.
• Offer a great recruitment incentive.

Many nationwide lease businesses such as Morgan Highfield & Land build up good working relationships with car suppliers. This often means that prices stay competitive, and new vehicles are always available on release dates.

The Cons of Business Contract Hire

Whilst there are numerous benefits of leasing a vehicle for business purposes, there are also some potential drawbacks, too. These may include:

• You never own the vehicle outright.
• Limitations to mileage, once the lease has been agreed upon.
• Potential charges if the vehicle is damaged.
• Potentially restrictive terms and conditions.

As you can imagine, leasing a vehicle for business purposes is quite common, and leases are built for regular, business use.

It needs to be stated that, if a business can’t forecast the payments to the finance company, then leasing a vehicle may not be the correct option. However, it may be worth contacting the lease company if you are interested in leasing, as the lease period may be extended, or the annual mileage may be reduced to allow for a more affordable lease.

Leasing a Prestige Vehicle with Morgan Highfield & Land

Here at Morgan Highfield & Land, we know a thing or two about leasing vehicles. In fact, we see many businesses lease vehicles with us on a daily basis. Our Best Deals offer affordable leasing options, including Polestar, Jaguar, BMW and even Maserati.

Our lease deals are always competitive, and we allow you to adjust your initial rental, contract hire term and annual mileage to best suit you and your business’s needs. So if it’s a powerful petrol engine or a conscious and future-ready electric vehicle you are looking to lease, we won’t be beaten on price.

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Disclaimer: this article does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.