When opting for car leasing, the choice is between business and personal leasing. While the processes for both choices are similar, business leasing is more cost-effective than personal leasing because of the tax payment option variances.
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An arrangement for the long-term renting of corporate vehicles is a business lease. If you work for a VAT-registered business you can lease new cars for 2-4 years for a set monthly payment. Employees may use the vehicle rented under a corporate contract for both personal and professional needs. The tax rate for personal use miles will be the same as it would be for a personal lease.
Prior to the agreement starting, you must pay an initial rental cost depending on the monthly price. The monthly cost will decrease with a larger down payment. You can select an annual mileage cap, and commercial leases might have a greater cap. It’s possible to be charged for extra miles and damage. Here is your go-to guide to help you out online.
Similar to corporate leasing, personal leasing involves primarily using the car for personal travel. A mileage maximum for each year is determined after making an initial rental payment and fixed monthly installments; the same fees are levied if you go over this limit or damage the vehicle. Regardless of whether the lease is for business or personal use, the loan provider is the legal owner and registered keeper of the leased vehicle.
If you sometimes use your privately leased automobile for business travels, you might be able to claim back some of the costs for fuel, maintenance, and other expenditures, so long as your employer and insurance provider is on board and you maintain track of the car’s business use. Visit for additional details on personal and business leasing.
Employees may use company-owned vehicles during working hours, but they are required to park them at the business’s address after hours. Pool vehicles are free from business car tax, although the majority of BCH arrangements are. These are only available for business travel, thus they cannot be used for leisure travel.
Expense is a key distinction between commercial and residential leases. Because lessees are entitled to a 50 percent VAT reimbursement, business leases are frequently more inexpensive per month than personal leases. Also, all VAT can be recovered if the lessee adds maintenance to the contract.
Fuel expenditures are included in the expenses eligible for a tax refund, but only for miles used for business-related reasons. The lessee has three alternatives for reclaiming VAT on gasoline if the leased vehicle is used for both personal and business-related travel and is not covered by a flat rate scheme. They have the option to not claim any VAT at all, to just claim the VAT on gasoline used for business travels, or to only claim the VAT on fuel used for private excursions. Business leasing costs are normally substantially less expensive than Personal Contract Hire (PCH) offers since PCH deals are frequently offered with VAT already included in the monthly payments.
The Name on the Lease
Consider the key distinction between a leasing arrangement for personal or corporate use. Although the firm signs the papers for business leasing, the individual does so for personal leasing. Depending on the kind of lease agreement you select, several documents will be needed. When choosing personal leasing, you must provide photo identification (such as a driver’s license) and evidence of address (like utility bills or bank records). Business leasing needs three months of bank statements, audited finances, as well as residency documentation and the identity of the principal company director’s identity
Moreover, because of the various tax advantages, leasing a business vehicle is typically less expensive than leasing a personal vehicle. In contrast to personal leasing, largely for private use, business leasing permits the long-term rental of corporate vehicles that may be used for personal and professional purposes.
Lessees pay an initial rental price, consistent monthly payments and an annual mileage restriction. Company-owned and made accessible for business usage, pool vehicles are free from corporate car tax but cannot be used for personal travel. Lessees are eligible to recoup 50 percent of the VAT they spent on commercial leases, or 100 percent if maintenance is included. Only miles used for business purposes are eligible for reimbursement for fuel expenditures. Depending on whether it is a personal or company lease, the lessee’s name is different on the lease, and various paperwork is needed for each type.
Content provided by The Weekly Driver News Service and additional sources.