COMMENT from reader Robert Wastell, director of Comparecontracthire.com on our article about contract hire.
I read your lead business car advice article about contract hire with maintenance and would recommend adding something or clarifying a point about VAT non-recoverability – in other words, the effective rental payable.
Many businesses may not know that VAT is applicable to the base rental and if you are not VAT registered, for example a sole trader below the VAT threshold, you can’t recover any of the VAT.
For VAT registered users, 50% of the VAT charged on the finance element of the contract hire lease and 100% of the maintenance element is recoverable assuming there is some private mileage element.
Robert – thanks for the clarification on VAT recoverability. A good point to remember if you are considering using contract hire to finance your next business car. Ralph Morton, editor.