Hire Purchase
- Traditional form of funding with a
minimum deposit and fixed monthly payments.
- Ownership title passed on completion
of the agreement.
- Monthly payments do not attract VAT.
- On balance sheet for the business
user.
- Capital cost can be written down for
tax purposes on a reducing balance up to £3000.00 against taxable
profits per annum.
- Interest (usually without limit) is
also allowable against taxable profits but may be restricted for
private use.
Lease Purchase
- Funding option with a minimum
deposit or upfront instalment and fixed monthly payments.
- The agreement can carry a final
payment called the balloon or residual which reduces the monthly
payment during the agreement.
- Ownership title passed on completion
of the agreement.
- Monthly payments do not attract VAT.
- On balance sheet for the business
user.
- Capital cost can be written down for
tax purposes on a reducing balance up to £3000.00 against taxable
profits per annum.
- Interest (usually without limit) is
also allowable against taxable profits but may be restricted for
private use.
Personal Contract Purchase
- A variation on the hire purchase
theme with a minimum deposit and fixed monthly payments.
- The agreement carries a final
payment called a guaranteed future value which reduces the monthly
payment during the agreement.
- Three options are available at the
end of the agreement term, return the vehicle back to the finance
company with nothing further to pay, part exchange the vehicle at a
dealership or pay the guaranteed future value and keep the vehicle.
- Ownership title passed at the end of
the agreement if the guaranteed future value is paid.
- Monthly payment figures and
guaranteed future values are based on agreement period and annual
mileage.
- Monthly payments do not attract VAT.
- On balance sheet for the business
user.
- Capital cost can be written down for
tax purposes on a reducing balance up to £3000.00 against taxable
profits per annum.
- Interest (usually without limit) is
also allowable against taxable profits but may be restricted for
private use.
Finance Lease
- Funding option with a minimum
deposit or upfront instalment and fixed monthly payments.
- The agreement can carry a final
payment called the balloon or residual which reduces the monthly
payment during the agreement.
- A percentage of the sale proceeds
are returned after the vehicle has been sold, usually 95%.
- Ownership title retained by the
finance company.
- Off balance sheet for the business
user.
- Monthly payments attract VAT.
- 50% of VAT on monthly payments
reclaimable as long as the user is VAT registered.
- Monthly payments allowable against
taxable profits subject to Inland Revenue guidelines.
Contract Hire
- Funding option with a minimum
deposit or upfront instalment and fixed monthly payments.
- Typically these agreements include
all running costs i.e. servicing, tyres, road tax and replacement
vehicle.
- Monthly payment figures are based on
agreement period and annual mileage.
- Ownership title retained by the
finance company.
- Off balance sheet for the business
user.
- Monthly payments attract VAT.
- 50% of VAT on monthly payments
reclaimable as long as the user is VAT registered.
- Monthly payments allowable against
taxable profits subject to Inland Revenue guidelines.
|
