Any company which is considering business car leasing for their employees will soon find out that there is far more to think about than just the cost of the lease contract and the vehicle. Depending on how you choose to fund your vehicles, your company could benefit from tax advantages which could save the business and could save the company considerable amounts of money every year.
How Can My Company Save Tax From Business Car Leasing?
The options which are available vary in their details and often have very different outcomes at the end of the contract; this includes standard business car leasing and personal contract purchase (PCP). The deciding factor between these two types of contract is whether you want to own the car at the end or not.
If owning the vehicle at the end of the contract is a main priority, then your company can class the car as their asset and the depreciation is written off against taxable profits. Sometimes companies can even claim tax relief on the interest paid over the term of the contract agreement. However, unless the car is used 100% only for business use, the company cannot claim any VAT back on the vehicle.
Business car leasing provides an even better option if you want to make the company cars more tax efficient. First of all a part of the vehicles VAT can be reclaimed which provides a saving straight away when comparing to buying the car outright. Here are the different types of tax your company could save money on:
1. Value Added Tax (VAT) – When you take out business car leasing for your company, you can claim back 50% of the VAT from the monthly rate which you pay. If the vehicle is used only for business purposes, which unfortunately doesn’t include the commute, then you can claim back 100% of the VAT.
2. Corporation Tax – If your vehicles are below the 130g/km CO2 emission mark, you can claim 100% of the lease against corporation tax. This means you can reduce the taxable profits that your company pays by offsetting the lease from your vehicle; which means ultimately that you will pay less corporation tax. If your emissions are above the 130g/km, you’re allowed lease percentage is 85%.
3. National Insurance – You can save on National Insurance if you use business car leasing for a small fleet. Employers must pay Class 1A National Insurance contributions on the benefit in kind value of an employee’s company car. The lower the CO2 emissions of the company car you lease, the lower the NI payments you will have to make for your workers.
Business Car Leasing From Select Contracts
Select Contracts provide complete personal and business car leasing services for every make or model of car including all of the latest releases. All their vehicles come with free UK delivery from their national network of dealers and vehicle preparation centres.
For more information on any of their cars or car leasing services, please get in contact by emailing email@example.com or call 0845 6770 770.